JAGDISH CHANDER versus RAMESH CHANDER AND ORS.

Citation: [2007] 5 S.C.R. 720 · Decided: 26-04-2007 · Supreme Court of India · Bench: H.K. SEMA · Disposal: Appeal(s) allowed

Cited by 6 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
JAGDISH CHANDER 
v. 
RAMESH CHANDER AND ORS. 
APRIL 26, 2007 
B 
[H.K. SEMA AND R.V. RA VEENDRAN, JJ.] 
Arbitration and Conciliation Act, 1996: 
Sections 7 and /I-Arbitration agreement and appointment of 
C arbitrator-Settlement of disputes clause in Deed of Partnership-Providing 
for disputes to be settled mutually or referred for arbitration if parties so 
determine-Held, the relevant clause of Deed of Partnership is not an 
arbitration agreement, but a provision which enables arbitration only if 
parties mutually decide after due consideration as to whether dispute should 
D be referred to arbitration or not-The clause requires consent of parties 
before dispute can be referred to arbitration-Jn absence of arbitration 
agreement, arbitrator could not have been appointed-Section 89, CPC has 
~ 
also no application to the case-Attributes/essential elements/settled 
principles in regard to what constitutes an arbitration agreement, as given 
in various decisions of Supreme Court, set out in the judgment-Code of Civil 
E Procedure, 1908-Section 89. 
Code of Civil Procedure, 1908: 
Section 89-Even though the Section mandates courts to refer pending 
suits to any of several alternative disputes resolution processes, th.ere cannot 
F be a reference to arbitration under Section 89, unless there is a mutual 
'f 
~ 
consent of parties for such reference. 
Words and Phrases: 
Expression "dispute shall be referred to arbitration if parties so 
G determine", appearing in a settlement of disputes clause of a Deed of 
Partnership-Meaning of 
Word 'determine '-Connotation of 
Appellant and respondent No.I entered into a business partnership. 
H 
720 
• 
JAGDISH CHANDER v. RAMESH CHANDER 
721 
Clause 16 of the Deed of Partnership relating to settlement of disputes A 
provided: "If any dispute touching the partnership arises between the partners, 
the same shall be mutually decided by the partners or shall be referred for 
arbitration if the parties so determine". On the strength of this clause 
respondent No.1 filed an application under Sections 11(5) and 11(6) of the 
Arbitration and Conciliation Act, 1996 for appointment of an arbitrator to B 
decide the dispute regarding dissolution of the partnership firm and for 
rendition of accounts. The appellant resisted the application, inter alia, on 
· the ground that the partnership deed did not contain any agreement to refer 
any dispute to arbitration and Clause 16 of the Deed of Partnership was not 
an arbitration agreement. The Judge of the High Court, who heard the 
application, held Clause 16 as an arbitration agreement and appointed a retired C 
Judge as the sole arbitrator. Aggrieved, the appellant filed the present appeal 
On the question: whether Clause 16 of the Deed of Partnership is an 
'arbitration agreement within the meaning of Section 7 of the Arbitration 
and Conciliation Act, 1996, 
Allowing the appeal, the Court 
D 
HELD: 1.1. In view of the attributes or essential elements of an 
arbitration agreement and the well settled principles in regard to what 
constitutes an arbitration agreement referred to in various decisions of this 
Court and set out in this judgment, Clause 16 of the Deed of Partnership in E 
the instant case is not an arbitration agreement as defined under Section 7 
of the Arbitration and Conciliation Act, 1996. 
(Paras 8 and 9] (725-A, B; 727-C] 
K.K. Modiv. KN. Modi, (1998) 3 SCC 573; Bharat Bhushan Bansal v. 
U.P. Small Industries Corporation Ltd, (1999] 2 SCC 166; Bihar State Mineral F 
Development Corporation v. Encon Builders (l)(P) Ltd., (2003] 7 SCC 418 
and State of Orissa v. Damodar Das, [1996] 2 SCC 216, relied on. 
1.2. When Clause 16 of the Deed of Partnership uses the words "the 
dispute shall be referred for arbitration if the parties so determine", it means G 
that it is not an arbitration agreement but a provision which enables arbitration 
only if the parties mutually decide after due consideration as to whether the 
disputes should be referred to arbitration or not. The expression "determine" 
indicates that the parties are required to reach a decision by application of 
mind. In effect, the clause requires the consent of parties before the disputes 
can be referred to arbitration. The main attribute of an arbitration agreement, H 
722 
SUPREME COURT REPORTS 
(2007] 5 S.C.R. 
A namely, consensus ad idem to refer the disputes to arbitration is missing in 
clause 16 relating to settlement of disputes. (Para 91 (727-A, B, CJ 
B 

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