HARI SHANKAR SINGHANIA AND ORS.versusGAUR HARI SINGHANIA AND ORS.

A                    HARi SHANKAR SINGHANIA AND ORS.
                                    v.
                      GAUR HAR! SINGHANIA AND ORS.

                                    APRIL 4, 2006

B                [H.K. SEMA AND DR. AR. LAKSHMANAN, JJ.]


          Arbitration:

          Arbitration Act, 1940:
c
           Section 20- Application under-- Limitation for-Three brothers formed
    a partnership firm-There was disagreement between them as to the division
    of the assets involvLd in the partnership firm-Distribution of the immoveable
    properties could not be effected by 31.5.1987 as contemplated by the Deed of
D   Dissolution--Nominees were appointed by each group to work out an
    arrangement--Numerous letters written by the parties to find a w01 10 seltle
    the dispute pertaining to the division of assets-Lust communication in this
    regard was on 29. 91989--Plailll under S. 20 filed by one group on 8. 5.1992.
    High Court dismissed the arbitrution suit on the ground of limitution being 50
    days beyond the period of three yeurs computed from I IJ. 3.19,W -Correctness
E   of-Held: Article 137 of the limitation Act applies to an application under S.
    20 of the Arbitration Act--App/ication is required to be filed within a period
    of three years when the right to apply uccrues--Right to apply accrues when
    difference or dispute arises between the parties to the arbitration agreement-
    Right to apply accrued only on the date of the last correspondence i.e.
F   29.9.1989--Hence, suit filed on 8.5.1992 is within limitation.

          limitation Act, 1963: Article 137.

           Arbitration suit--Family arrangements or settlements-Dispute over
    distribution of immoveable properties-Duty of court- -Held' Family settlement
    should be treated differently from any other formal commercial settlement-
G   Technicalities as limitation elc. should not be put ut risk of the implementation
    of a settlement drawn by a family-Hence, technical considerations should
    give way to peace and harmony in enforcement of family arrangements or
    settlements.

H                                         726
                                                                                        -
                    HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA                727

             There was a disagreement between the appellants and the respondents        A
      as to the division of the assets involved in the partnership firm formed by
      three brothers. Therefore, the distribution of the immoveable properties could
      not be effected by 31.5.1987 as con.templated by the Deed of Dissolution.
      Ultimately, in February 1988 the three groups each of appointed nominees
      to work out an arrangement for satisfactory distribution of the properties of     B
      the said dissolved firm. The nominees held several meetings but no agreement
      of distribution could be arrived at. There were numerous letters written by
      both parties to find a way to settle the dispute pertaining to the division of
      assets. The last letter that was exchanged in this regard was a letter dated
      29.9.1989.

-           The appellants filed a plaint under Section 20 of the Arbitration Act,
      1940 before the High Court on 8.5.1992. The High Court dismissed the
                                                                                        c
      Arbitration Suit on the ground of limitation being 50 days beyond the period
      of three years computed from 18.3.1989. Hence the appeal.

            On behalf of the appellants, it was contended that the date of the last     D
      communication between the parties to reach a settlement was 29.9.1989; that
      the right to apply under Section 20 of the Arbitration Act accrued to the
      appellants on 29.9.1989; and, therefore, limitation period would start running
      from 29.9.1989 and hence arbitration suit filed on 8.5.1992 was within
      limitation as laid down in Article 137 of the Schedule to the Limitation Act.
      1963.                                                                             E
            The following questions arose before the court:-

-           I. When the right to file the application under Section 20 of the
      Arbitration Act, 1940 has accrued and when it becomes time barred?
                                                                                        F
            2. Whether in the context of Section 20 of the Arbitration Act, 1940 a
      difference or dispute can be said to have arisen between the parties without
      there being any denial or repudiation of a claim by a party?

            Allowing the appeal, the Court
                                                                                        G
            HELD: I.I. It is now well-settled that Article 137 of the Limitation Act,
---   1963 applies to an application under Section 20 of the Arbitration Act, 1940.
      Accordingly, an application under Section 20 of the Act for filing the
      arbitration agreement in Court and for reference of disputes to arbitration
      in accordance therewith is required to be filed within a period of three years
                                                                                        H
     728                            SUPREME COURT REPORTS [2006] 3 S.C.R.

A when the right to apply accrues. The right to apply accrues when difference
     or dispute arises between the parties to the arbitration agreement.

           1.2. The High Court has committed an error in construing Article 137
     of the Schedule to the Limitation Act, 1963 in a manner, which would unduly
     restrict the remedy of arbitration especially in family disputes. It is a well
B    settled policy of law in the first instance to promote a settlement between the
     parties wherever possible and particularly in family disputes. [737-Dj

           2.1. Where a settlement with or without conciliation is not possible, then
    comes the stage of adjudication by way of arbitration. Article 137, as construed
C   in this sense, then as long as parties are in dialogue and even the differences
    would have surfaced it cannot be asserted that a limitation under Article 137
    has commenced. Such an interpretation will compel the parties to resort to
    litigation/arbitration even where there is a serio.us hope of the parties
    themselves resolving the issues. [737-Ej

D         2.2. The High Court has failed to appreciate that merely because the
    parties did not take steps for distribution of the immovable properties it did
    not automatically follow that the disputes and differences had arisen between
    them in this regard. In fact, from the correspondence on record, it is clear
    that the parties were making efforts to complete the distribution of the
    immovable properties as per the terms of the agreement between them. The
E   correspondence between the parties does not indicate that any dispute or
    difference had arisen between them on or before 18.3.1989 and the finding
    of the High Court to the effect that the correspondence exchanged between
    the parties leaves no manner of doubt that the dispute had arisen between
    the parties in any case on 18.03.1989 is erroneous, contrary to the record and
F   unsustainable. (738-C, DJ

          3. In the instant case, the correspondence exchanged between the parties
    was not merely in the nature of reminders but also instruments to resolve
    the matter and amicably negotiate. Therefore, when the negotiations were
    taking place between the parties by way of various letters written by both
G   the parties the right to apply can be said to accrue when it becomes necessary
    to apply, that is to say when a dispute in fact arose. Furthermore, the
    respondent did not ever dispute the claim of the appellants. (739-G j

           Vulcan Insurance Cu. ltd v. Maharaj Singh, AIR (1976) SC 287, Stale of
    Orissc1 v. Damodar Das, AIR (1996) SC 942; S. Rajan v. State uf Kera/a, AIR
H   (1992) SC 1918 and Major (R1Jtd) Inda Singh Rekhi v. Delhi Development
                HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA               _729
 Authority, [1998) 2 SCC 388, relied on.                                             A
       Oriental Building and Furnishing Co. Ltd v. Union ofIndia. AIR (1981)
 Del 293, approved.                                        · · ·           ·

      4.1. It cannot be said that merely because nominees were appointed for
 working out an arrangement, which could not ultimately be arrived at, a·            B
 dispute or difference arose way back in February, 1988. In fact, even
 immediately after this, the ~orrespondence ~xchanged between the parties
 reveals a forthcoming attitude and amiable effol'ts made towards
 implementing the deed of dissolution. [740-EJ

       4.2. Therefore, the right to apply under Section 20 of the Arbitration        C
 Act, 1940 accrued to the appellants only on the date of the last correspondence
 between the parties and the period of limitation commences from the date of
 the last communication between the parties. Therefore;the finding of the High
 Court that the application under Section 20 of the Arbitration- Act, 1940 is
 beyond the period of limitation is erroneous. )741-A)                               D
       . 5. Furthermore, the contesting respondents cannot allege that moving·'
  the Court is a better-suited remedy than arbitration proceedings as they have .
  of their. own free will only adopted the arbitration clause in the Deed of
. Dissolution. [741-FJ
                                                                                     E
       6.1. A family settlement is treated differently from any other formal .
 commercial settlement as such settlement in the eyes of law ensures peace and
 goodwill among the family members. Such family settlements generally meet
 with the approval of the Courts. Such settlements are governed by a special
 equity principle where the terms are fair_ and bona fide. taking into account
 the well being of a family. )741-G; 742-AJ                                    F
         6.2. The concept of 'family arrangement or settlement' and the present
 one in hand should be treated differently. Technicalities of limitation etc.
 should not be put at risk of the implementation of a settlement drawn by a
 family, which is essential for maintaining peace and harmony in a family. Any
 such arrangement would be upheld if family settlements were entered into to         G
 allay disputes existing or apprehended and even any dispute or difference apart,
 if it H'GS entered into bona fide to n1ainlain peace or to bring about harmony in
 the family. Even a semblance of a claim or some otherground, as say affeetion,
 inay suffice. (742-A, BJ
                                                                                     H
     730                              Sl!PREME COURT REPORTS [2006] 3 S.C.R.

A         Ram Charan v. Gir!ja Nandini, AIR (1996) SC 323, Sahu Madho Das v.
    Pandit Mukand Ram, f 1995( 2 SCR 22, Maturi Pullaiah v. Maturi Narasimham,
    AIR (1966) SC 1836, Krishna Bihari/al v. Gulabchand 1197111 SCC 837, S.
    Shanmugam Pillai v. K. Shanmugaon Pillai, 1197312 SCC 312, Kale v. Deputy
    Director<J(Consolidatiun, (197613SCC119 and K.K. Modiv. KN. Modi, (1998(
    3 sec 573, relied on.
B
           Clifton v. Cockburn, (1834) 3 my & 76 and William v. William, (1866)
    LR 2 Ch 29, referred to.

           Kerr: "On Fraud" p. 364, referred to.

C         6.3. Technical considerations should give Wl.IY tu peace and harmony in
    enforcement ojfamizy arrangements or settlements. (744-FI

          7. I. The observation made by the High Court was that, an era!
    application for condonation of delay will not be entertained in a Court of law.
    '!'his observation is not pertinent in the present case because, condonation of
D delay needs to be asked for only if there is a delay in filing a suic and in the
    fact situation of this case, there is no delay in the filing of the Arbitration suit
    and the suit for arbitration filed by the appellants is within time prescribed
    under Article 137 of the Schedule to the Limitation Act, 1963. [744-Gf

E         7.2. The arbitration suit filed by the appellants is well within time as
    the dispute is deemed to have arisen only after the last communication between
    the parties dated 29.9.1989, whereby there were efforts made to amicably settle
    the dispute between the parties. (745-Af

           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 126/2005.
F
         From the Judgment and Order dated 8/9th June 2004 of the High Court
    of Bombay in Appeal No. 440/1996 in Arbitration Suit No. 1904/1992.

         Dr. A.M. Singhavi, Prag P. Tripathi. Pradip Kumar Khaitan. Ms. Gauri
    Rasgotra and Shiladitya Rakshit for Mis. Khaitan & Co. A.O.R. for the
G   Appellants.

          Anil B. Divan, S. Ganesh, Bhargava V. Desai, S.V. Mehta. Rahul Gupta,
    Ms. l'<upur Kanungo, Vinod B. Agarwala and Arvind Kumar for M/s. Gagrat
    & Co. for the Respondent.

H          The Judgment of the Cou11 was delivered by
         HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J] 73 J

          DR. AR. LAKSHMANAN, J. This appeal was directed against the                   A
    final judgment and order dated. 8/9th June, 2004 passed by the Division
    Bench of the High Court of Judicature at Bombay in Appeal No. 440of1996
    in Arbitration Suit No. 1904 of 1992 whereby the High Court dismissed the
'   appellants' appeal and upheld the order of the learned single Judge dismissing
    the appellants' application under Section 20 of the Arbitration Act, 1940 as
    being barred by the law of limitation.
                                                                                        B

          The short facts of the case are as follows:-

•         A partnership firm was formed by three brothers of the Singhania family.
    The family owned considerable amount of immovable property, which was
    brought into the firm's business. In 1987, the partnership firm was dissolved
                                                                                        c
    by ·way of dissolution deed as a family settlement. Under the dissolution
    deed, clause 13 which enabled the parties or any party to go for arbitration
    in case there was a dispute between them reads as follows:

           "13. That if at any time any dispute, doubt or question shall arise          D
           between the parties hereto or their respective legal representative,
           either on the construction of interpretation of these presents or
           respecting the accounts, transactions, profit or loss of business or
           their respective rights and obligations of the parties hereto or otherwise
           in relation to the winding up of the partnership, then any such dispute,
           doubt or question shall be referred to the arbitration of a single           E
           Arbitrator. In case, however, the parties are unable to agree upon a
           single Arbitrator, a panel of three Arbitrators shall be appointed, one
           of them to be appointed by Shri Hari Shankar Singhania or failing
           him by the Sixth Party, or failing the Sixth Party by the Seventh
           Party, or failing the Seventh party, by the Eighth party and the second
                                                                                        F
           to be appointed by Dr. Gaur Hari Singhania and failing him by the
           second party and failing the second party by the ninth party and the
           third to be appointed by Shri Vijaypat Singhania and failing him by
           the fourth party, provided always that the decision and/or award by
           the said panel of the arbitrators shall have to be unanimous and in the
           event of unanimity not being reached by the panel of arbitrators, they       G

-          shall appoint an Umpire whose decision shall be final. All the
           proceedings, before the sole arbitrator and/or panel of arbitrators shall
           be governed by the provisions contained in the Arbitration Act, 1940
           or by any statutory modification or re-enactment thereof."

          Disagreement between the parties took place as to the division of the         H
     732                           SUPREME COURT REPORTS [2006] 3 S.C.R.

A assets involved in the partnership firm. Therefore, the distribution of the said
    immoveable properties could not be effected by 31st May 1987 as
    contemplated by the Deed of Dissolution. Ultimately in February 1988, the
    three groups each appointed a nominee to work out an arrangement whereby
    distribution of the said immoveable properties of the said dissolved firm
                        1
B   could be made and effected in the manner acceptable to all. The nominees
    held several meetings but no agreement of distribution could be arrived at.
    Further it can be observed that there were numerous letters written by both
    parties to find a way to settle the dispute pertaining to the division of assets
    involved in the partnership firm which was dissolved. The last letter that was
    exchanged in this regard was a letter dated 29 September, 1989.
c
        On May 8, 1992, a plaint under section 20 of the Arbitration Act, 1940
  was filed before the High Court of Judicature at Bombay by the appellants
  (1-7 ousted group). On September 19, 1992, respondent No.I herein, Dr.
  Gaur Hari Singhania group (contesting respondent Nos.1-9) filed an affidavit
  in opposition stating and submitting that, the suit filed by the appellant in the
D High Court is barred by limitation and that the High Court had no jurisdiction
  to entertain the suit and, therefore, the same is liable to be dismissed.

          It is pertinent to notice that respondent Nos. I0-20 supported the claim
    made by the appellants. A learned Single Judge of the Bombay High Court
E   on April 09, 1996 dismissed the Arbitration Suit of the appellants on the
    ground of limitation being 50 days beyond the period of three years computed
    from March 18, 1989. An appeal was preferred by appellant Nos. 1-7 and
    learned Judges of the Division Bench of the Bombay High Court dismissed
    the appeal on the ground of limitation and that oral prayer for condonation
    of delay will not be entertained by the Courts.
F
          Against this order of the Bombay High Court, the appellants have come
    by way of special leave petition before this Court. Leave was granted on
    03.01.2005 by this Court.

           We heard Dr. Abhishek Manu Singhvi, learned Senior Counsel appearing
G for appellants 1-7, Mr. S. Ganesh, learned senior counsel appearing for
    respondents I0-20 and Mr. Anil Diwan, learned Senior Counsel appearing
    for the respondents 1-9.

         The claim of the appellants was that, after the dissolution of the
  partnership there were a series of communication between the appellants and
H the respondents on the division of the assets which wa5 a part of the dissolved
         HARi SHANKAR SINGHANIA v. GAUR HAR! SINGHANIA [LAKSHMANAN, J.]         733
    firm in order to arrive at an amicable settlement as evident from the words        A
    used in the letters of correspondence like, to not cause unduly delay in the
    distribution of the property/expedite the matter of dissolution (letter dated
    29th September, 1989) etc. Therefore, according to Dr. Abhishek Manu
    Singhvi, learned counsel appearing for the appellants, the right to apply under
    section 20 of the Arbitration Act, 1940 accrued to the appellants on the date      B

-   of the last communication between the parties to reach a settlement, which
    is the letter dated 29th September, 1989. Therefor.e, limitation period will
    start running for three years as stated under Article 137 of the Limitation Act,
    1963 only from that date. The thrust of the argument on behalf of the appellants
•   is that the right to apply under section 20 of the Arbitration Act, 1940 accrued
    to the appellants on receipt of the letter dated 29th September, 1989.             C
          According to the contesting respondents, the differences and disputes
    with respect to distribution of immovable properties amongst the partners of
    the dissolved firm arose before 3 lst May, 1987 and that is why the distribution
    of the said immovable properties could not be effected as contemplated by
    the Deed of Dissolution. The respondents further claimed that the appointment      D
    of nominees by the parties was enough evidence of disagreement and
    differences between the parties which arose on 29th February, 1988. Further
    the respondent also relied on communications dated 4th October, 1988, 13th
    February, 1989 [notice] and 18th March 1989, to prove differences among
    the parties.                                                                       E
           It is now well settled that Article 13 7 of the Limitation Act, 1963
    applies to an application under Section 20 of the Arbitration Act, 1940.
    Accordingly, an application under Section 20 of the Act for filing the
    arbitration agreement in Court and for reference of disputes to arbitration in
    accordance therewith is required to be filed within a period of three years        F
    when the right to apply accrues. The right to apply accrues when difference
    or dispute arises between the parties to the arbitration agreement. In the facts
    of the case, it is therefore necessary to find out as to when the right to apply
    accrued.

          Therefore, the questions before us. that deserve consideration are:          G
           I.   When the right to file the application under Section 20 of the
                Arbitration Act has accrued and when it becomes time barred;
                and
          2.    Whether in the context of Section 20 of the Arbitration Act, 1940      H
    734                             SUPREME COURT REPORTS [2006] 3 S.C.R.

A               a difference or dispute can be said to have arisen between the
                parties without there being any denial or repudiation of a claim
                by a party?

         We have heard both the parties extensively. We have carefully perused
  all the letters, annexures and the orders passed by the High Court produced
B in Court.
         Letter dated 16th. September, 1988 is a letter by Shri Hari Shankar
    Singhania to Shri Gaur Hari Singhania specifically stating that"/ request that
    the distribution of immovable properties is being delayed and I will request
C   you to please make all attempts to expedite the same. "

          Letter dated 4th October, 1988 is a letter by Shri Gaur Hari Singhania
    to Shri Hari Shankar Singhania stating that "I on my part have given all the
    information and materials and done everything possible to expedite the
    distribution. The Committee appointed by the partners is seized of the matter.
D   I am equally anxious that the matter should be amicably sorted out as early
    as possible. "

         Letter dated 18th October, 1988 is a letter by Shri Hari Shankar
    Singhania to Shri Gaur Hari Singhania wherein it is stated that "/ only
    requested you to make all attempts to expedite. You can judge for yourselves
E   what is the reason for the delay. In my view, unless there is sincere desire
    to solve the matter expeditiously the matter will drag on and I can only
    repeat that this will not be to the benefit of any one. I can only request you
    to do all you can to get the matter expedited. "

          Letter dated 24th November, 1988 is a letter by Shri Gaur Hari Singhania
F to Shri Hari Shankar Singhania wherein it is stated that, "/ am sending the
    modified account for your kindly returning the same duly signed by you and
    all the other partners at your end. "

         Letter dated 13th February, 1989 is a letter by Shri Vijaypat Singhania,
  Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari Shankar Singhania
G and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania wherein it is
  stated that "As regards Ganga Kuti, your comments on the licence Agreement
    dated 2.1.1986 do not meet the issue raised in the letter of Shri Hari Shankar,
    dated 18th October, 1988. As pointed out, the said agreement stipulates
    payment oflicence fee of Rs.24,000 per annum payable by monthly instalments
H   of Rs.2000 to be paid in advance on the 5th day of every month. Neither the
     HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA (LAKSHMANAN, J.]          735

mode of payment nor the amount paid were in conformity with the said A
agreement. Due to violation of this key provision, the licence is no more valid
and it should be treated as such and the monies received on this account
should be returned and suitable corrective entries made in the accounts.
Moreover, such arrears of rent were received after the dissolution which
should not be accepted and given effect to, in the spirit of the terms of B
dissolutions. Apparently it is not bona fide. We are returning the accounts for
the period (20th March, 1987 to 31st March, 1988) for necessary rectification.
The property should henceforth not be rented/licensed to anyone. "

      Letter dated 18th March, 1989 is a letter by Shri Gaur Hari Singhania
to Shri Hari Shankar Singhania wherein it is stated that "The licence is             C
subsisting and cannot be treated as null and void Since you have returned
the account unsigned, I am sending the accounts once again to you with a
request to kindly sign the accounts and forward the same to me for signature
of Shri Vijaypat and Shri Ajaypat. "

       Letter dated 22nd May, 1989 is a letter by Shri Vijaypat Singhania,           D
Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari Shankar Singhania
and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania wherein it is
stated that "As regards Ganga Kuti, we had in our letter dated February 13,
1989 stated the factual position in regard to the licence agreement dated 2nd
January, 1986 and the fact of the licence remaining no more valid particularly       E
in view of the continuous violation of the essential provisions of the licence
agreement for two years from 1.4.1985...... The spirit of the terms of dissolution
has certainly not been adhered to in this regard and it is only fair in the
fitness of the circumstances that the licence agreement should no more be
treated as valid and appropriate amendment be made in that regard by returning
the monies received and making suitable corrective entries in the accounts.
                                                                                     F
We are returning the accounts for the period 20th March, 1987 to 31st March,
 1988 for necessary rectification."

       Letter dated 8th July, 1989 is a letter by Shri Gaur Hari Singhania to
Shri Hari Shankar Singhania wherein it is stated that "However, as stated            G
above, the distribution of the immovable properties is being delayed due to
entirely the unreasonable stand taken by or on your behalf and due to
insistence on your behalf of the distribution to be effected in a particular
mode which is neither feasible nor reasonable and proper.... .It is, therefore,
not only in the interest of all the partners but imperative that you should not      H
hold up the signing of the accounts. I, therefore, once again send lo you the
    736                             SUPREME COURT REPORTS (2006] 3 S.C.R.

A said accounts with a request tu return the same duly signed. I need not add
    that if as a result of your not signing the said accounts any adverse orders
    are passed by the Income Tax Officer in the pending assessment of the said
    firm for the said twu assessment years 1987-1988 and 1988-1989, you alone
     will be held responsible."

B        Letter dated 29th September, 1989 is a letter from Shri Vijaypat
   Singhania, Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari
   Shankar Singhania and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania
   wherein it is stated that "It is not fair to impute impropriety or to say that the
   stand taken by us is an attempt to bring pressure upon immovable properties
C of the dissolved partnership. ft is equally not fair to say that the distribution
   uf immovable properties remains pending because of the unreasonable ur
   improper stand taken by us. The Deed of Dissolution and the understanding
  among the partners 1s quite clear as to the mode of distribution and as such
  there is no question of any partner dictating the mode of distribution. .... We
  are sure that you will expedite the matter of dissolution of 1he immovable
D properties in the same spirit as was envisaged at the time of dissolving the
  firm."

         It is seen from the above letters that on 29.02.1988, the parties decided
  to appoint one representative each who would endeavour to arrive at an
E agreed distribution acceptable to all parties. This only shows that it is the
  modality of distribution which were tried to be worked out. The contemporary
  correspondence, above referred to, would also show that the letters exchanged
  between the brothers were in amiable language. It is thus clear that at this
  stage the parties had not reached a stage of break where an adjudication of
F dispute had become inevitable. Thereafter, in September, 1988 letters were
  written as to the distribution of properties. The letter written by the appellants
  on 16.09.1988 and its reply of 04.10.1998 clearly show that there was not yet
  a break down of the agreement, in fact, on behalf of the respondents. It was
  suggested that a Committee appointed by the partners is seized of the matter.
  It is clear from a reading of this letter that the parties, as late as in October,
G 1988 were trying to obtain an amicable resolution. This situation continued
  on 18.03.1989 as well. The accounts were sent by the respondents. The letter,
  inter alia, annexed certain confirmatory letters and requested that the accounts
  be confirmed by the appellants. In reply thereto in May, 1989 the accounts
  were sent back, as the letter disclosed that there were some differences as to
H one of the properties. On 08.07.1989, the respondent reiterated that the
  accounts were correct and sent back for the confirmation and also alleged
      HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.]         73 7
that the matter of distribution of immovable properties remained pending            A
because of the unreasonable and improper stand taken by the appellants. It
was argued that at best it could be suggested that by this date, the stage has
reached where the partners could have contemplated the adjudication of their
disputes. This would show that the petition would clearly be within time. Suit
under Section 20 of the Arbitration Act was filed on 8.5.1992.
                                                                                    B
       On 29.09.1989, a letter was written by Shri Vijaypat Singhania, Shri
Ajaypat Singhania, Shri Hari Shankar Singhania and Bharat Hari Singhania
to Shri Gaur Hari Singhania, respondent wherein it is stated that it is not fair
to impute impropriety or to say that the stand taken by the appellants is an
attempt to bring pressure upon immovable properties of dissolved partnership.       C
It is also stated therein that the respondent will expedite the matter of
dissolution of the immovable properties in the same spirit as was envisaged
at the time of dissolving the firm. If this letter dated 29.09.1989 is taken into
account, it would show that Section 20 suit would clearly be within time. In
our opinion, the High Court has committed an error in construing Article 137
in a manner, which would unduly restrict the remedy of arbitration especially       D
in family disputes of the present kind. It is a well-settled policy of law in the
first instance is always to promote a settlement between the parties wherever
possible and particularly in family disputes.

         Where a settlement with or without conciliation is not possible, then
comes the stage of adjudication by way of arbitration. Article 137, as construed    E
in this sense, then as long as parties are in dialogue and even the differences
would have surfaced it cannot be asserted that a limitation under Article 137
has commenced. Such an interpretation will compel the parties to resort to
litigation/arbitration even where there is serious hope of the parties themselves
resolving the issues. The learned Judges of the High Court, in our view, have       p
erred in dismissing the appellants appeal and affirming the findings of the
learned Single Judge to the effect that the application made by the appellants
under Section 20 of the Act, 1940 asking for reference was beyond time
under Article 137 of the Limitation Act. The learned Judges ought to have
allowed the appeal and quashed and set aside the impugned order passed by
the learned Single Judge and ought to have restored and allowed arbitration         G
suit filed by the appellants. As already noticed, the correspondence between
the parties, in fact, bears out that every attempt was being made to comply
with and carry out the reciprocal obligations spelt out in the agreement between
the parties. As rightly pointed out by learned counsel for the appellant that
the learned Judges of the Division Bench have erred in coming to the                H
     738                            SUPREME COURT REPORTS [2006] 3 S.C.R.

A conclusion that the distribution of immovable properties in specie as provided
    in the Deed of Dissolution dated 26.03.1987 and a Supplementary Agreement
    dated 20.03.1987 could not be done before 31.05.1987 due to some differences.
    There is absolutely no material on record on the basis of which the learned
    Judges could have come to such a conclusion. None of the correspondence
    referred to by the learned Judges spells out the existence of any disputes as
B   a result of which the properties could not be distributed prior to 31.05.1987.

           The High Court, in our view, has erred in coming to the conclusion that
    because no distribution of the property had been made till 29 .02.1988, it was
    indicative of the fact that there were disputes and differences between the
C   parties. The High Court, in our view, has failed to appreciate that merely
    because parties did not take steps for distribution of the immovable properties
    it did not automatically follow that disputes and differences had arisen between
    them in this regard. In fact, from the correspondence on record, it is clear that
    the parties were making efforts to complete the distribution of the immovable
    properties as per the terms of the agreement between them. It is submitted
D   that the correspondence between the parties does not indicate that any dispute
    or difference had arisen between them on or before 18.03.1989 and the
    finding of the learned Judges to the effect that the correspondence exchanged
    between the parties leaves no manner of doubt that the dispute had arisen
    between the parties in any case on 18.03.1989 is erroneous, contrary to the
E   record and unsustainable.

           We shall now advert to the various decisions cited by both the parties.

           law on the Subject:

           Article 137 of the Limitation Act is reproduced hereunder:
F
     Description of application                      period of       Time from
                                                     Limitation      which period
                                                                     begins to run

     "Any other application for which no period Three years          When the right
G of limitation is provided elsewhere in this                        to       apply
     division."                                                      accrues.

        The period of three years prescribed in Art. 137 of the Limitation Act,
  1963 is applicable to file an application under section 20 of the Arbitration
H Act, 1940 as decided by this Court in the case of Vulcan Insurance Co. ltd.
     HARi SHAN KAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.]      739

v Maharaj Singh, AIR (1976) SC 287. The limitation period starts running         A
from the time the right to apply accrue. An application filed under section 20
of the Arbitration Act has to be filed within three years from the date when
the right to apply accrues.

      In the case of State of Orissa v. Damodar Das, AIR ( 1996) SC 942,
this Court held that, the right to apply accrues under section 20, Arbitration   B
Act, 1940, as soon as dispute or difference arises on unequivocal denial of
claim by one party to the other party as a result of which the claimant
acquires a right to refer the dispute to arbitration.

       In the case of S. Rajan v. State of Kera/a, AIR (1992) SC 1918, the
right to apply accrues when the difference arises or differences arise between   C
the parties involved. It is thus a question of fact, not a question of law as
urged by the respondents, and should be determined in each case having
regard to the facts of the case.

      In Major (Reid) lnder Singh Rekhi v. Delhi Development Authority,          D
[1988] 2 SCC 338 at 340, this Court holding that the application under
section 20 was filed within time examined that:

       " ... a party cannot postpone the accrual of cause of action by writing
        reminders or sending reminders but where the bill had not been
       finally prepared, the claim made by the claimant is the accrual of        E
       cause of action. A dispute arises where there is a claim and a denial
       and repudiation of the claim .... There should be a dispute and there
       can only be a dispute when a claim is asserted by one party and
       denied by the other on whatever grounds. Mere failure or inaction to
       pay does not lead to the inference of the existence of dispute. Dispute
       entails a positive element and assertion ofdenying, not merely inaction   F
       to accede to a claim or request. Whether in a particular case dispute
       has arisen or not has to be found out from the facts and circumstances
       of the case."

      In the instant case, correspondence was not merely in the nature of
reminders but also instruments to resolve the matter and amicably negotiate. G
Therefore, when the negotiatio~s were taking place between the parties by
way of various letters written by both parties the right to apply can be said
to accrue when it becomes necessary to apply, that is to say when a dispute
in fact arose. Furthermore, the respondent did not ever dispute the claim of
the appellants.                                                               H
     740                           SUPREME COURT REPORTS [2006] 3 S.C.R.

A          Learned counsel appearing for the appellants placed reliance on Oriental
    Building and Furnishing Co. ltd. v. Union of India, AIR ( 1981) Del 293,
    where the material question was what is the starting point of limitation for
    moving a petition under section 20 of the Arbitration Act, 1940. It was held
    that: "Neither party can move the Court without the existence of a difference
    between them. So, the material question is, when the difference arose between
B   the parties and not when the lease expired, nor when it was entered into." The
    court further observed, " ..... a difference can arise long afier some work has
    been done under a contract. There can be negotiations between the parties
    and all sorts ofcorrespondence. But it is only when they come to the conclusion
    that they cannot resolve the di~pute between them, it can be said that a
C   difference arises. A difference under the arbitration agreement is a claim
    made by one party, which is refuted by the other party. At that stage. it is
    open to the parties or any one of them to go for arbitration to get this
    difference or differences settled and it is only at this stage it is possible to
    say that a difference has arisen between the parties. "

D          This decision of the Delhi High Court squarely covers the case on hand
    as a close perusal of the letters exchanged between the parties show clearly
    that there was intention to arrive at an amicable settlement between the family
    members with regard to the division of assets in question.

           It cannot be said that merely because nominees were appointed for
E working out an arrangement, which could not ultimately be arrived at, a
    dispute or difference arose way back in February 1988. In fact, even
    immediately after this, the correspondence exchanged between the parties
    reveals a forthcoming attitude and amiable efforts made towards implementing
    the deed of dissolution.
F        An examination of the correspondence can give us valuable insight as
  to the "differences" if any among the parties. The first such communication
  was made on 16 September, 1988 from Shri Hari Shankar Singhania [appellant)
  to Gaur Hari Singhania [Respondent] requesting the rtspondent to make all
  attempts to expedite distribution of the immovable properties. In reply to this
G was the communication relied on by the respondents from Dr. Gaur Hari
  Singhania [Respondent] to Shri Hari Shankar Singhania [appellant No. I]
  dated 4th October, 1988. This communication also does not reveal either
  hostility or dispute and only exposes an effort "to expedite the distribution".
  The last sentence of the above mentioned communication reads: "I am equally
H anxious that this matter should be amicabZv sorted out as early as possible."
      HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.] 74 l

      Therefore, we observe that the right to apply under section 20 of the         A
Arbitration Act, 1940 accrued to the appellants only on the date of .the last
correspondence between the parties and the period of limitation commences
from the date of the last communication between the parties. Therefore, the
finding of the High Court that the application under section 20 of the
Arbitration Act, 1940, is beyond the period of limitation is erroneous.             B
      Further, in an English decision rendered by the Court of Appeal in
Hughes v. Metropolitan Rly. Co., it was held that, where negotiations for
settlement are pending, the strict rights of the parties do not come into play.

      It is also pertinent to note that under the new Act, namely the Arbitration   C
and Conciliation Act, 1996 that came into force in 1996, the intervention of
the Court in the matter of arbitration proceedings has been minimized to a
great extent. Further, there is no provision in the Arbitration and Conciliation
Act, 1996 that is similar to section 8 (power of court to appoint arbitrator),
section 20 (application to file in Court the Arbitration Agreement) and section
33 (Arbitration agreement or award to be contested by application), which           D
were present in the Arbitration Act of 1940.

      Another thing that should not miss the attention of the Court is that, the
assets in question are with the contesting respondent Nos. I to 9 and an
amicable settlement for the division of the assets have not been arrived at
since last 18 years as clear from the facts. Hence it is observed that the          E
contesting respondents are the ones who are enjoying the assets in question
and therefore we observe that, the respondents are merely trying to drag the
proceedings endlessly forever and for another period of uninterrupted
enjoyment of the assets.

      Furthermore the contesting respondents cannot allege that moving the
                                                                                    F
Court is a better-suited remedy than arbitration proceeding as they have of
their own free will only adopted the arbitration clause in the Deed of
Dissolution.

Family Arrangement/Family Settlement:-
                                                                                    G
      Another fact that assumes importance at this stage is that, a family
settlement is treated differently from any other formal commercial settlement
as such settlement in the eyes of law ensures peace and goodwill among the
family members. Such family settlements generally meet with approval of the
Courts. Such settlements are governed by a special equity principle where the       H
    742                             SUPREME COURT REPORTS [2006) 3 S.C.R.

A tenns are fair and bona fide, taking into account the well being of a family.
         The concept of 'family arrangement or settlement' and the present one
  in hand, in our opinion, should be treated differently. Technicalities of
  limitation etc. should not be put at risk of the implementation of a settlement
  drawn by a family, which is essential for maintaining peace and harmony in
B a family. Also it can be seen from decided cases of this Court that, any such
  arrangement would be upheld if family settlements were entered into to allay
  disputes existing or apprehended and even any dispute or difference apart, if
  it was entered into bona fide to maintain peace or to bring about harmony
  in the family. Even a semblance of a claim or some other ground, as say
C affection, may suffice as observed by this Court in the case of Ram Charan
  v. Girija Nandini, AIR (1966) SC 323.

          In Lala Khunni Lal v. Kunwar Gobind Krishna Narain, the Privy Council
    examined that it is the duty of the courts to uphold and give full effect to a
    family arrangement.
D
            In Sahu Madho Das & Ors. v. Pandit Mukand Ram & Anr., [1955] 2
    SCR 22 [Vivian Bose Jagannadhadas and BP Sinha JJ.] placing reliance on
    Clifton v. Cockburn, (1834) 3 My & K 76 and William v. William, (1866) LR
    2Ch 29, this Court held that a family arrangement can, as a matter of law,
    be implied from a long course of dealings between the parties. It was held
E   that " .. so strongly do the courts lean in favour of family arrangements that
    bring about hannony in a family and do justice to its various members and
    avoid, in anticipation, future disputes which might ruin them all, that we have
    no hesitation in taking the next step (fraud apart) and upholding an
    arrangement.."
F          The real question in this case as framed by the Court was whether the
    appellant/plaintiff assented to the family arrangement. The court examined
    that "the family arrangement was one composite whole in which the several
    dispositions formed parts of the same transaction."

G          In Ram Charan Das v. Girjanadini Devi, (Supra), this Court observed
    as follows:

           "Courts give effect to a family settlement upon the broad and general
           ground that its object is to settle existing or future disputes regarding
           property amongst members of a family ..... The consideration for such
H          a settlement will result in establishing or ensuring amity and good
     HAR! SHAN KAR S!NGHANIA 1•. GAUR HARi SINGHANIA [LAKSHMANAN, J.] 743

        will amongst persons bearing relationship with one another."              A
      In Maturi Pullaiah v. Maturi Narasimham, AIR (1966) SC 1836, this
court held diat "although conflict of legal claims in praesenti or in future is
generally a condition for the validity of family arrangements, it is not
necessarily so. Even bona fide disputes, present or possible, which may not
involve legal claims, will suffice. Members of a joint Hindu family may, to       B
maintain peace or to bring about harmony in the family, enter into such a
family arrangement. If such an arrangement is entered into bona fide and the
terms thereof are fair in the circumstances of a particular case, courts will
more readily give assent to such an arrangement than to avoid it."

      Further in Krishna Bihari/a/ v. Gulabchand, [1971] 1 SCC 837, this C
Court reiterated the approach of courts to lean strongly in favour of family
arrangements to bring about harmony in a family and do justice to its various
members and avoid in anticipation future disputes which might ruin them all.
This approach was again re-emphasised in S. Shanmugam Pilfai v. K.
Shanmugam Pillai, [1973] 2 sec 312 where it was declared that this court D
will be reluctant to disturb a family arrangement.

       In Kale & Ors. v. Deputy Director of Consolidation and Ors., [1976]
3 SCC 119 [YR Krishna Iyer, RS Sarkaria & S Murtaza Fazal Ali, JJ.] this
Court examined the effect and value of family arrangements entered into
between the parties with a view to resolving disputes for all. This Court E
observed that "By virtue of a family settlement or arrangement members of
a family descending from a common ancestor or a near relation seek to sink
their differences and disputes, settle and resolve their conflicting claims or
disputed titles once for all in order to buy peace of mind and bring about
complete harmony and goodwill in the family. The family arrangements are
governed by a special equity peculiar to themselves and would be enforced
                                                                                 F
if honestly ...... made the object of the arrangement is to protect the family
from long drawn litigation or perpetual strives which mar the unity and
solidarity of the family and create hatred and bad blood between the various
members of the family. Today when we are striving to build up an egalitarian
society and are trying for a complete reconstruction of the society, to maintain G
and uphold the unity and homogeneity of the family which ultimately results
in the unification of the society and therefore, of the entire country, is the
prime need of the hour .... the courts have, therefore, leaned in favour of
upholding a family arrang;m1e11t instead of disturbing the same on technical
    rivial grounds. Where the courts find that the family arrangement suffers H
     744                              SUPREME COURT REPORTS [2006] 3 S.C.R.

A from a legal lacuna or a formal defect 1he rule of esluppel is pressed into
    service and is applied to shut out plea of the person who being a party 10
    family arrangement seeks to unsettle a settled dispute and claims to revoke
    ;he family arrangement.. . The law in England on this point is almost the
    same."

B          The valuable treatise Kerr on Fraud at p. 36../ explains the position of
    law, "'the principles which apply to the case of ordinary compromise between
    strangers do not equally apply to the case of compromises in the nature of
    family arrangements. Family arrangements are governed by a special equity
    peculiar to themselves, and will be enforced if honestly made, although they
C   have not been meant as a compromise, but have proceeded from an error of
    all parties originating in mistake or ignorance of fact as to what their rights
    actually are, or of the points on which their rights actually depend." Halsbury's
    Laws of England, Vol.17, Third edition at pp.215-216.

           In KK .Modi v. KN Modi & Ors., [ 1998] 3 SCC 573 [Sujata Manohar
D & DP Wadhwa, JJ. ]. it was held that the true intent and purport of the
    arbitration agreement must be examined- [para 21] Further the court examined
    that ........ a family settlement which settles disputes within the family should
    nut be light(v i111e1jercd wi1h especially when the settlement has been already
    acted upon by some members of the family. In the present case, from 1989
E   to 1995 the Memorandum of Understanding has been substantially acted
    upon and hence the parties must be held to the settlement which is in the
    interest of the family and which avoids disputes between the members of the
    family. Such settlements have to be viewed a little differently Ji-om ordinary
    contracts and their internal mechanism for working out the settlement should
    not be lightly disturbed ...
F
         Therefore, in our opinion, technical considerations should give way to
    peace and harmony in enforcemem offamily arrangements or settlements.

           The observation made by the Bombay High Court while dismissing the
    appeal of the appellants was that, an oral application for condonatiun of
G   d.day will 1101 be entertained in Court of law according to the laws present
    in our judicial system. This observation, in our opinion, is not pertinent in the
    present case because. condonation of delay needs to be asked for only if there
    is a delay in fling a suit and in the fact situation of this case, there is no delay
    in the filing oftht: Arbitration suit as observed earlier and the suit for arbitratiOJ'
H   filed by tht: appdlants is within time prescribed under Article 137 <>'.
                HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J I         745

           Limitation Act, 1963.                                                              A
                  Thus we conclude by observing that, the Arbitration suit filed by the
           appellants is well within time as the dispute is deemed to have arisen only
           after the last communicatior between the parties dated 29th September. 1989,
           whereby, there were efforts made to amicably settle the dispute between the
           parties.                                                                     B
                Also as an admitted fact the appellants and respondent Nos. 10 to 20
          were at all material times and still are ready and willing to do all the things
          necessary for the proper conduct of the arbitration including the appointment
          of Arbitrator.
                                                                                              c
                Further it is not fair on the appellants to let this dispute continue, with
          the assets in question under the control and enjoyment of the contesting
          respondents 1-9.

                 It may be mentioned that even though the plea of extension of limitation
          has not been taken into account by the appellants in the application filed and D
          the learned counsel for the respondents has objected to the learned counsel
          for the appellants making submission pertaining to extension of limitatio~ to
          tile the present application, learned Single Judge of the High Court has
          permitted the learned counsel for the appellant to make submissions in th is
          regard without the plea of extension of limitation being taken in the application. E

           Why the dispute between members of family should be settled:-

                   In the instant case, the partnership .firm was dissolved w.e.f. March,
            1987 by consent of parties. The Deed of Dissolution was also entered into
            between the parties on March 26, 1987. Jn 1988, the three groups each F
            appointed a nominee to work out an arrangement whereby the distribution of
            the properties of the dissolved firm could be made and effected. The nominees
            held several meetings but no agreement of distribution could be arrived at.
            Meeting of the partne_rs took place on various occas.ions in regard to the
            issue of distribution of assets which has been considerably delayed. Several
            correspondences exchanged between the heads of three branches regarding G
            amicable distribution of all the immovable properties in specie. It is stated that
            14 properties are situated in Kanpur and l property in Bombay which are very
    ""--· valuable. Respondents 1-9 being in enjoyment were simply delaying
          '.distribution in specie. In the circumstances, appellant No.I herein and the
          0
            ' ' 'r members of the branch of Lakshmi pat Singhania wanted to take recourse H
                1
:
    746                    SUPRl:ME COURT REPORTS                    [2006) 3 S.C.R.

A to due process of law for getting distribution and allotment in specie of their
    one-third share in those 15 immovable properties. Hence, application under
    Section 20 of the Arbitration Act, 1940 was filed in the High Court of Bombay
    on 08.05.1992. Other group opposed the application on the ground of limitation
    and the lack of jurisdiction. Single Judge rejected the plea of the lack of
B   jurisdiction but upheld the plea of limitation on the basis that disputes and
    differences arose on 18.03.1989 whereas the application was filed on 08.05.1992
    i.e. to say 50 days beyond the period of 3 years. The Division Bench also
    dismissed the appeal filed by the appellant on the ground of limitation.

            It is an admitted fact that the three branches of Singhania family are
                                                                                        ..
C    each entitled to one-third share in immovable properties. It is stated that the
     rents of the properties situated at Kanpur from family companies and other
     in whose favour tenancy had been shown at nominal rents long time back
     after the dissolution of the partnership finn are being collected by the branch
    of Padampat Singhania and deposited in the bank account titled J. K. Bankers
     (since dissolved). The said bank account was opened by the erstwhile partners
D   of J.K. Bankers upon dissolution of J.K. Bankers the rental income from the
     properties in Kanpur, it is alleged is being credited by the branch of Padampat
     Singhania to the credit of ex-partners account of J.K. Bankers in accordance
     with their shares i.e. one-third share each after paying their very property tax
    and other outgoings. Such credit balance in the account of such bankers is
E    being paid to the branches of Singhania family from time to time. The three
     branches of Singhania family are showing the rental income in their returns
    of income tax as income from house property and have to pay income-tax
    thereon in accordance with law. Furthermore, the three branches of Singhania
    family are showing these properties having their own undivided proportionate
    share in their wealth tax returns and have to pay wealth tax therein in
F   accordance with law. It is stated that Hari Shankar Singhania, appellant No. I
    and other members of Lakshmi Pat Singhania branch are n.lt being credited
    with or paid any monies/income whatsoever in respect of the Bombay property
    since the date of dissolution of J.K. Bankers although they have to pay
    wealth tax returns. It is stated by the appellants that the immovable properties
G   in possession of the various respondents are extremely valuable and required
    to be protected pending disposal of arbitration. It is also stated that similar
    interim reliefs have been granted to the appellants are far back as 21.05.1992
    passed by the Single Judge. Also learned Division Bench had passed an
    interim order dated 15.04.1996. While dismissing the appeal on the ground of
    limitation Division Bench of the High Court has extended the interim order by
H   12 weeks. This Court on 27.08.2004 suggested to counsel appearing for all
           HARi SHANKARSINGHANIA v. GAUR HARi SIN GHAN IA [L.-\KSHMANAN, J .]   74 7
     parties without looking into the relationship of the parties and the nature of A
     disputes, why not all the disputes among the parties be directed to be placed
     for adjudication by an arbitrator or for resolution by a conciliator. At the time
     of hearing, all the learned counsel for the parties assured that the interm order
     passed by the High Court shall be honoured by all the parties until the matter
     comes up for hearing. On 03.01.2005, it was reported by learned senior counsel B
     appearing for respondent Nos. 1-9 that the parties are not agreeable for
     settlement by conciliation. This Court, thereafter, granted leave and posted
     the appeal for final hearing in the month of March, 2005. The matter was listed
     on 06.09.2005. After hearing the parties, this Court passed the following
     order:-
                                                                                       c
           "Heard the parties

                 Having regard to the nature of dispute and the fact that the
            contesting parties are close relatives, we are clearly of the view that
            it is still better that such dispute is resolved through conciliation, so
            that the past ill feelings/misunderstandings, if any, are evaporated in D
            the thin air with the resolution of the dispute. In response to our
            suggestion the parties agree to refer to conciliator to be appointed by
            the Court. Accordingly, we appoint Hon 'ble Mr. Justice N. Santosh
            Hegde, retired Judge of this Court to be the Conciliator io resolve the
            dispute through conciliation. The terms and conditions and the place E
            of sitting shall be decided by the Conciliator himself. The fees and
            other expenses of the Conciliator shall be borne equally by the three
            disputing parties.

                We hope and trust that the parties will resolve their dispute
            through conciliation with a view to maintain good relationship between     F
            the parties. This order is passed without prejudice to the rights and
            contentions of the parties that may raise in the proceedings. But it
            must be grasped that the approach of the parties must be
            accommodative and keep no records of wrong.

                List it after three months."                                           G
.,         Hon'ble Mr. Justice N. Santosh Hegde addressed a letter on 02.02.2006
     to the Registrar General, Supreme Court of India, New Delhi- I I 0 00 I with
     reference to the conciliation in the matter. The letter reads thus:

            "The Hon 'ble Supreme Court of India vide its Order dated 06.09 .2005      H
    748                   SUPRF\>IE COURT REPORTS                 (2006] 3 S.C.R.

A          referred the above matter for conciliation by me. I have held many
           meetings between the parties and at one stage I was under the
           impression that a conciliation could be possible, but unfortunately at
           a later stage it is found that such a result could not be achieved.
           Having considered all the possibilities, I am to report to the Hon'ble
           Court that the conciliation in the case referred to above, has failed.
B          Hence, I request you to kindly inform the Court accordingly.

              I express my gratitude to the Court for having referred the
           conciliation to me."

          It is thus seen that the above facts would clearly go to show that the
c contesting respondent Nos. 1-9 are not at all interested in any conciliation,
    mediation or arbitration but only interested in enjoying the bulk of the
    immovable properties of the firm and refusing to carry out their obligations
    under and pursuant to the said Deed of Dissolution by permitting the
    distribution of the said properties in specie and free from any encumbrance
D   as contemplated by the said Deed of Dissolution dated 26.03.1987 and the
    supplementary agreement dated 28.03.1987.

           At the time of hearing, it was argued by learned senior counsel for
    respondent Nos. 1-9 that since the appellants have filed the suit, the same
    may be continued by the appellants and a direction be issued to the Court
E   concerned to dispose of the same within a particular time frame. In reply, it
    was submitted that the suit was filed by the appellants without prejudice to
    their rights and contentions under the arbitration clause in the agreement and
    that the arbitration is the only effective and quick remedy. We have extracted
    clause 13 of the arbitration agreement which enable the parties to go for        --r·
F   arbitration in case there was a dispute between them. It has now come to a
    stage that the real dispute has arisen between the parties. Already the matter
    is pending adjudication from 1987 onwards, respondent Nos. 1-9 are admittedly
    in possession and enjoyment of the valuable immovable properties depriving
    the valuable rights of the appellants the other respondent Nos. I 0-20. We
    should not, therefore, allow respondent Nos. l-9 to drag the proceedings any
G   further. Parties have to settle their disputes one day or the other. In our
    opinion, the time has now come to nominate a single Arbitrator as provided
    under clause 13 of the agreement. It was argued that in case this Court allows
    the appeal, the matter may be remitted to the High Court for appointment of
    a singk Arbitrator and in case the parties are unable to agree upon a single
H   Arbitrator a panel of three Arbitrators shall be appointed as provided in the
             HARi SHANKARSINGHANIA v. GAUR HARi SINGHANIA (LAKSHMANAN,J.]          749

       said agreement. We feel that such a course, if adopted, would only enable the       A
       contesting respondent Nos. 1-9 to squat on the property and enjoy the
       benefits, income etc. arising therefrom.

              We, therefore, appoint Hon'ble Mr. Justice S.N. Variava, a retired Judge
       of this Court as a single Arbitrator and decide the dispute between the parties
       within 6 months from the date of entering upon the reference. The occasion,         B
       if any, warrants the sole Arbitrator may extend further reasonable time for
       completion of the Arbitration proceedings. Learned Arbitrator is at liberty to
       fix his fees etc. and other expenses which shall be borne equally by three
       parties. The arbitration shall be at Bombay or as decided by the Arbitrator
       in consultation with the parties. The proceedings before the Arbitrator shall       C
       be governed by the provisions contained in the Indian Arbitration Act, 1940
       or by any statutory modification or re-enactment thereof.

             It is seen from the plaint filed in the arbitration suit the following
       disputes and differences, amongst others, have arisen between the parties
       and which are to be resolved by the sole Arbitrator pursuant to the agreement:- D

               "(a) To the extent defendant themselves are occupying such
                    properties, the defendants should be directed to vacate the
                    properties to enable distribution of the said properties. in specie
                    free from encumbrances;
'              (b)   The defendants obligation to have vacant possession of the
                                                                                           E
                     immoveable properties listed at items I to l 3 of Exhibit D hereto
                     and to ensure that persons other than themselves actually vacate
                     the said properties so that the same are available for distribution
...-                 in specie free from encumbrances between the plaintiffs and
                     defendants pursuant to the said Deed of Dissolution;                  F
               (c)   Directions and steps be taken by defendants to achieve the
                     vacant possession mentioned in paragraph (a) and (b) above;

               (d)   Distribution of the abovementioned properties in specie free
                     from encumbrances between the plaintiffs and defendants;
                                                                                           G
               (e)   Distribution of the properties mentioned at items 14 and 15 of
                     the Exhibit D hereto subject to the encumbrances;

              (t)    Fixation of equalization amount, if necessary;
               (g)   If for any reason any of the defendants do not permit and
                     comply with direction for getting vacant possession of any of H
    750                     SUPREME COURT REPORTS                    [20D6) 3 S.C.R.

A                  the immoveable properties listed in items 1 to 13 of Ex"D" to the
                   plaint, then the same should be valued on the basis of vacant
                   possession and the plaintiffs should be paid their share on the
                   basis of the vacant possession by the defendants."
                                                                                        •
        The aforesaid disputes are all covered by the arbitration clause and fall
B within the scope and ambit thereof. The parties are at liberty to file their
  further pleadings, claims etc. before the sole Arbitrator.

    Conclusion: Better late than never

             We have already referred to the concept of family arrangement and          •
C settlement. Parties are members of three different groups and are leading
  business people. We, therefore, advise the parties instead of litigating in
  Court they may as well concentrate ort their business and, at the same time,
                                                                                        --
  settle the disputes amicably which, in our opinion, is essential for maintaining
  peace and harmony in the family. Even though the parties with a good
D intention have entered into the Deed of Dissolution and to divide the properties
  in equal measure in 1987, the attitude and conduct of the parties have changed,
  unfortunately in a different direction. Therefore, it is the duty of the Court that
  such an arrangement and the terms thereof should be given effect to in letter
  and spirit. The appellants and the respondents are the members of the family
  descending from a common ancestor. At least now, they must sink their
E disputes and differences, settle and resolve their conflicting claims once and
  for all in order to buy peace of mind and bring about complete harmony and
  goodwill in the family.

          For the foregoing reasons, we allow this appeal and set aside the orders
    passed by the learned Single Judge and as affirmed by the Division Bench
F   in Appeal No. 440/1996 in arbitration Suit No.1904/1992 dated 09.06.2004.
    Parties are directed to bear their own costs:

        We direct all the parties to appear before the Arbitrator on 03.05.2006.
  The interim order passed by the High Court shall be honoured by all the
G parties till the disposal of the matter by the Arbitrator. Parties are at liberty
  to take further orders from the Arbitrator.

    v.s.s.                                                        Appeal allowed.