Deciding Authority: Supreme Court of India
Name of the Judges: Justice R.V. Raveendran and Justice K.S. Radhakrishnan
Date of Judgement: January 5, 2010
Facts of the Case: The first respondent and appellant are brothers. The first respondent filed a suit against the appellant alleging that their father Durganarayan Sharma died on 20.10.2005 who had made a will dated 21.10.2003 bequeathing portions of suit premises to him The appellant was in possession of it and was liable to deliver its possession to the first respondent The executors of the said will were impleaded respondents 2 and 3. The appellant filed a Civil Suit for partition and separate possession of his one-sixth share in the ancestral properties. He also sought a declaration that the said will null and void. The two suits were consolidated for trial. Respondents 2 and 3 who claimed to be the executors of the will of Durganarayan Sharma, filed an application under section 8 of the Arbitration & Conciliation Act, 1996 and alleged that the deceased Durganarayan Sharma had made a declaration on 15.10.2005(shortly before his death) that in case of any dispute in related to the will, it should be decided by Advocate U.N. Bhandari, and the parties to the two suits being children and grandchildren of Durganarayan Sharma, were bound by the said declaration and the dispute should therefore be decided by arbitration.
Issue: The trial court held that in view of the said provision for resolution of disputes by arbitration, its jurisdiction was barred by the provisions of the Act. Consequently, the trial court dismissed both the suits. Feeling aggrieved, the appellant filed an appeal contending that there was no agreement for arbitration and that there was no ground for dismissal of his suit. The Division Bench of the High Court issued notice to show-cause why the appeal should not be admitted and the order passed by the trial court had been stayed. The first respondent accepted the decision of the trial court and filed a claim statement on 20.10.2007 before Shri U.N. Bhandari, the sole Arbitrator named in the declaration who issued notices to the appellant and other non-petitioners in the claim. The appellant appeared before Shri U.N. Bhandari, and objected to his jurisdiction to act as an arbitrator by contending that there was no arbitration agreement between the parties and also pointed out that neither he nor first respondent had signed the declaration giving consent to Shri U.N. Bhandari being the Arbitrator. He also challenged the continuation of Shri Bhandari as an arbitrator by alleging bias against him. In these circumstances on 17.11.2007, Shri Bhandari withdrew himself from the arbitrator. On such withdrawal, the first respondent filed an application under section 11(6) read with section 14(1)(b) and 15(2) of the Act for appointment of an independent arbitrator. The designate of the Chief Justice who heard the matter, allowed the said application by the impugned order dated 16.5.2008, and appointed an Arbitrator to resolve the disputes. The said order is challenged in this appeal by special leave.
Judgement: It was submitted that in the pending first appeal (against the decision dismissing his suit under Order 7 Rule 11 of the Code), if it is held that there is no arbitration agreement between the parties or if the court refuses to refer the parties to arbitration, the suits will have to proceed and that will lead to conflicting decisions. It is evident from sub-section (3) of section 8 that the pendency of an application under section 8 before any court will not come in the way of an arbitration being commenced or continued and an arbitral award being made. It follows that the mere fact that an appeal from an order dismissing the suit under Order 7 Rule 11 CPC (on the ground that the disputes require to be settled by Arbitration) was pending before the High Court, will not come in the way of the appointment of an arbitrator under section 11 read with section 15(2) of the Act, if the Authority under section 11 finds it necessary to appoint an Arbitrator.
While the respondents relied upon the Will, the appellant denied the existence of any such Will. The validity of the Will was pending consideration in the two civil suits filed by the appellant and the first respondent. The alleged Will did not contain any provision for arbitration. Even if the Will had provided for reference of disputes to arbitration, it would be merely an expression of a wish by the testator and cannot be considered as an Arbitrator agreement among the legatees. Such a wish expressed in a declaration by a father, even if proved, could not be construed as an agreement in writing between the parties to the dispute agreeing to refer their disputes to arbitration.
Ratio: The existence of an arbitration agreement as defined under section 7 of the Act is a condition precedent for exercise of power to appoint an arbitrator/Arbitral Tribunal, under section 11 of the Act by the chief Justice or his designate. It is not permissible to appoint an arbitrator to adjudicate the disputes between the parties, in the absence of an arbitration agreement of mutual consent.
Decision: The Supreme Court held the view that there is no arbitration agreement between the parties. The appeal was allowed and the impugned order of the Designate of the Chief Justice appointing an Arbitrator was set aside.
By: Roopali Mohan, 2nd Year, Vivekananda Institute of Professional Studies, New Delhi