TARUN DHAMEJAversusSUNIL DHAMEJA & ANR.

                 [2024] 12 S.C.R. 987 : 2024 INSC 973

                             Tarun Dhameja
                                    v.
                           Sunil Dhameja & Anr.
                       (Civil Appeal No. 14005 of 2024)
                               06 December 2024
            [Sanjiv Khanna,* CJI and Sanjay Kumar, J.]


                            Issue for Consideration
       Whether the arbitration clause between the parties is non-existent
       or requires agreement of all the parties to the dispute to refer the
       dispute to arbitration?
       Interpretation and construction of arbitration clause discussed.

                                   Headnotes†
       Arbitration and Conciliation Act, 1996 – Arbitration clause
       in a partnership deed invoked by Appellant who is the legal
       representative of a deceased partner – Arbitration clause
       reads as: “That if at any time either during the continuance
       of the partnership or after the retirement of any partner, any
       dispute or difference shall arise between the partners or their
       respective heirs or any one claiming through or under them,
       the same shall be referred to arbitration. Arbitration shall
       be optional & the arbitrator will be appointed by partners
       with their mutual consent. In any case of dispute arise then
       the Jurisdiction of Indore Civil Court shall be applicable
       & acceptable by the partners” – Appellant filed a petition
       U/s.11(6) of the Arbitration and Conciliation Act, 1996 that
       was dismissed by the impugned order.
       Held: Cannot be said that arbitration clause is optional in the
       sense that the arbitration clause is non-existent or that the matter
       would be referred to arbitration only if all the parties to the dispute
       agree – First portion of the arbitration clause is clear – Legal
       representatives or anyone claiming through a partner is entitled to
       invoke the arbitration clause – Reliance placed on second portion
       not to be read in isolation but in context of earlier portion of the



* Author
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       arbitration clause – The arbitration clause can be invoked by an
       aggrieved party who wants to take recourse to arbitration and
       mutual agreement exists to this extent – Absence of mutual consent
       by parties to appoint arbitrator does not obliterate or write off the
       arbitration clause – In terms of the Arbitration and Conciliation Act,
       1996 where parties cannot agree upon a common name as to who
       will act as an arbitrator, the court can appoint the arbitral tribunal.
       Reliance placed on Vidya Drolia v. Durga Trading Corpn. which in
       turn refers to the judgments in Fili Shipping Co. Ltd. v. Premium
       Nafta Products Ltd. and Oriental Insurance Co. Ltd. v. Narbheram
       Power & Steel (P) Ltd. on the issue of interpretation and construction
       of an arbitration clause – Arbitration clauses to be read in a
       pragmatic manner.

                                 Case Law Cited
       Vidya Drolia v. Durga Trading Corpn. [2020] 11 SCR 1001 : [2021]
       2 SCC 1; Oriental Insurance Co. Ltd. v. Narbheram Power & Steel
       (P) Ltd [2018] 4 SCR 826 : [2018] 6 SCC 534 – relied on.
       Wellington Associates Ltd. v. Mr. Kirit Mehta [2000] 4 SCC 272;
       Jagdish Chander v. Ramesh Chander & Ors., [2007] 5 SCR 720 :
       [2007] 5 SCC 719 – distinguished
       Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL
       40 – referred to.

                                   List of Acts
       Arbitration and Conciliation Act, 1996

                                List of Keywords
       Arbitration and Conciliation Act, 1996: Interpretation of arbitration
       clause; Pragmatic construction; Existence of arbitration clause;
       Mutual consent; Appointment of arbitrator; Appointment of arbitral
       tribunal.

                               Case Arising From
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14005
       of 2024
       From the Judgment and Order dated 31.05.2024 of the High Court
       of Madhya Pradesh at Indore in ARBC No. 19 of 2024
[2024] 12 S.C.R.                                                            989

                     Tarun Dhameja v. Sunil Dhameja & Anr.


                               Appearances for Parties
     Ravindra Singh Chhabra, Sr. Adv., Mudit Maheshwari, Aman Arora,
     Ms. Praneesha Nayyar, Sahil Monga, Advs. for the Appellant.
     Puneet Jain, Sr. Adv., Soumitra Chatterjee, Mrs. Sriparna Chatterjee,
     Anant Kumar Vatsya, Ms. Christi Jain, Advs. for the Respondents.

                    Judgment / Order of the Supreme Court

                                          Order

Leave granted.
In the present case, the arbitration clause in the Deed of Partnership
dated 16.07.2016 reads as under:-
            “23. Arbitration
            That if at any time either during the continuance of the
            partnership or after the retirement of any partner, any
            dispute or difference shall arise between the partners or
            their respective heirs or any one claiming through or under
            them, the same shall be referred to arbitration. Arbitration
            shall be optional & the arbitrator will be appointed by
            partners with their mutual consent. In any case of dispute
            arise then the Jurisdiction of Indore Civil Court shall be
            applicable & acceptable by the partners.”
In our opinion, it cannot be said that the arbitration clause is optional in
the sense that the arbitration clause is non-existent or that the matter
would be referred to arbitration only if all the parties to the dispute agree
to refer the dispute to arbitration.
In Vidya Drolia v. Durga Trading Corpn.,1 this Court delineated the issue
of interpretation and construction of an arbitration clause and referred
to the following observations in Fili Shipping Co. Ltd. v. Premium Nafta
Products Ltd.2 :
            “6. In approaching the question of construction, it is
            therefore necessary to inquire into the purpose of the


1   [2020] 11 SCR 1001 : (2021) 2 SCC 1
2   2007 UKHL 40
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            arbitration clause. As to this, I think there can be no doubt.
            The parties have entered into a relationship, an agreement
            or what is alleged to be an agreement or what appears
            on its face to be an agreement, which may give rise to
            disputes. They want those disputes decided by a tribunal
            which they have chosen, commonly on the grounds of
            such matters as its neutrality, expertise and privacy, the
            availability of legal services at the seat of the arbitration
            and the unobtrusive efficiency of its supervisory law.
            Particularly in the case of international contracts, they
            want a quick and efficient adjudication and do not want to
            take the risks of delay and, in too many cases, partiality,
            in proceedings before a national jurisdiction.”
Vidya Drolia (supra) further referred to the judgment in Oriental Insurance
Co. Ltd. v. Narbheram Power & Steel (P) Ltd.3 to hold:
            “150. In Narbheram Power & Steel (P) Ltd. [Oriental
            Insurance Co. Ltd. v. Narbheram Power & Steel (P) Ltd.
            (2018) 6 SCC 534], this Court while dealing with the
            arbitration clause in the insurance agreement, has held
            that the arbitration clause should be strictly construed,
            relying on the principles of strict interpretation that apply
            to insurance contracts. These observations have been
            repeated in other cases.
            151. What is true and applicable for men of commerce
            and business may not be equally true and apply in case of
            laymen and to those who are not fully aware of the effect
            of an arbitration clause or had little option but to sign on
            the standard form contract. Broad or narrow interpretations
            of an arbitration agreement can, to a great extent,
            effect coverage of a retroactive arbitration agreement.
            Pro-arbitration broad interpretation, normally applied to
            international instruments, and commercial transactions
            is based upon the approach that the arbitration clause
            should be considered as per the true contractual language
            and what it says, but in case of doubt as to whether
            related or close disputes in the course of parties’ business


3   [2018] 4 SCR 826 : (2018) 6 SCC 534
[2024] 12 S.C.R.                                                           991

                 Tarun Dhameja v. Sunil Dhameja & Anr.


          relationship is covered by the clause, the assumption is
          that such disputes are encompassed by the agreement.
          The restrictive interpretation approach on the other hand
          states that in case of doubt the disputes shall not be
          treated as covered by the clause. Narrow approach is
          based on the reason that the arbitration should be viewed
          as an exception to the court or judicial system. The third
          approach is to avoid either broad or restrictive interpretation
          and instead the intention of the parties as to scope of the
          clause is understood by considering the strict language
          and circumstance of the case in hand. Terms like “all”,
          “any”, “in respect of”, “arising out of”, etc. can expand the
          scope and ambit of the arbitration clause. Connected and
          incidental matters, unless the arbitration clause suggests
          to the contrary, would normally be covered.
          152. Which approach as to interpretation of an arbitration
          agreement should be adopted in a particular case would
          depend upon various factors including the language, the
          parties, nature of relationship, the factual background in
          which the arbitration agreement was entered, etc. In case
          of pure commercial disputes, more appropriate principle of
          interpretation would be the one of liberal construction as
          there is a presumption in favour of one-stop adjudication.”
The first portion of the arbitration clause is clear and states that, at any
time during the continuance of the partnership or after the retirement of
any partner, if any dispute or difference arises between the partners or
their respective heirs or anyone claiming from them, the same shall be
referred to arbitration. Therefore, the legal representatives or anyone
claiming through a partner is entitled to invoke the arbitration clause.
In the present case, the legal representative of the deceased partner,
Yeshwant Boolani, invoked the arbitration clause.
Reliance placed on the second portion of the arbitration clause, which
states that if any dispute arises, the arbitration shall be optional and the
Arbitrator will be appointed by the partners with their mutual consent, is
not to be read in isolation but in the context of the earlier portion of the
arbitration clause. This means that the arbitration clause can be invoked by
an aggrieved party who wants to take recourse to arbitration. To this extent
there is mutual agreement. Thereupon, the arbitrator can be appointed
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by mutual consent of all parties. This does not obliterate or write off the
arbitration clause. In terms of the Arbitration and Conciliation Act, 1996,4
where parties cannot agree upon a common name as to who will act as
an arbitrator, the court can appoint the arbitral tribunal. The arbitration
clauses have to be read in a pragmatic manner. The intent of the parties
while executing the arbitration clause in the Partnership Deed is clear.
The learned counsel for the respondents relied upon two judgments of
this Court in Wellington Associates Ltd. v. Mr. Kirit Mehta 5 and Jagdish
Chander v. Ramesh Chander & Ors.6 In our opinion, the facts of these
cases are entirely different and the arbitration clauses relied upon were
differently worded. In Wellington Associates Ltd. (supra), the proceedings
were under the Arbitration Act, 1940.
In view of the above discussion, the impugned judgment is set aside and
the appeal is allowed. The petition under Section 11(6) of the A&C Act,
filed by the present appellant, Tarun Dhameja, the legal representative
of the deceased partner, Yeshwant Boolani, will be treated as allowed.
The Coordinator/Chairman of the Madhya Pradesh Arbitration Centre or
the Arbitration Centre attached to the High Court of Madhya Pradesh
at Indore, as the case may be, will appoint an Arbitrator to adjudicate
the disputes inter-se the parties. The learned Arbitrator will file his/her
declaration under Section 12 of the A&C Act within 15 days from the
date of appointment. The fees of the learned Arbitrator will be fixed by
the said Centre or will be paid as per the Fourth Schedule to the A&C
Act, as may be applicable.
We clarify that we have not made any comments on the merits of the
claims and contentions raised by the parties.
Pending application(s), if any, shall stand disposed of.

Result of the case: Appeal allowed.



†
    Headnotes prepared by: Aandrita Deb, Hony. Associate Editor
                            (Verified by: Shadan Farasat, Sr. Adv.)


4      For short, “the A&C Act.”
5      (2000) 4 SCC 272
6      [2007] 5 SCR 720 : (2007) 5 SCC 719