Full Judgment Text
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1910 of 2009
(Arising out of Special Leave Petition(Civil) No.1342 of 2008)
Sunder Kukreja and others .. Appellants
-versus-
Mohan Lal Kukreja and another ..Respondents
J U D G M E N T
MARKANDEY KATJU, J.
1. Leave granted.
2. This appeal by special leave has been filed against the impugned
judgment dated 30.11.2007 of the Delhi High Court FAO(OS) No.469 of
2006.
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3. Heard Shri Arun Jaitley learned counsel for the appellants and Ms.
Nita Gokhale learned counsel for the respondents.
4. The dispute in this case is between brothers. The appellant Sunder
Kukreja filed a petition under Section 20 of the Arbitration Act, 1940
praying for an appointment of an Arbitrator. The parties are real brothers
and were carrying on business with each other in the name and style of M/s.
D.R. Kukreja and Company. Their mutual rights and obligations were
governed by partnership deeds, the last of which was executed on
10.7.1984. In terms of Clause 11 of the said deed, disputes arising between
the parties had to be resolved by way of arbitration before a sole arbitrator
to be nominated by the parties. Clause 11 reads as follows:
“11. In the event of any dispute or disputes arising
between the parties in the running of the partnership
business or any matter relating to partnership it shall be
referred to a sole arbitrator, agreed to in writing by the
parties and the award given by the sole arbitrator shall be
binding on all the parties. In case, the parties cannot
agree to a sole arbitrator, the matter will be decided in
accordance with the Indian Arbitration Act, 1940.”
5. It was contended by the respondent true that the partnership was
dissolved by the parties with mutual consent in terms of the retirement deed
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dated 16.8.1990 alleged to have been executed by the appellant. However,
the appellant denied executing any such retirement deed.
6. Subsequently the petition under Section 20 of the Arbitration Act was
filed by the appellants seeking a direction for filing the arbitration
agreement dated 10.7.1984 in the Court and for reference of the dispute
between the parties to arbitration in terms of Clause 11 thereof. It was
alleged in the petition under Section 20 that disputes relating to payment of
profits earned by the partnership firm and the interest on the said amount
had arisen between the parties which called for adjudication by the
arbitrator under Clause 11. The petitioner further alleged that the
respondent had been mismanaging the affairs of the partnership by
employing undesirable elements and other dubious means, thereby
disentitling himself to remain in control of the partnership.
7. The said petition under Section 20 was opposed by the respondent
herein who filed a written statement contending that the petitioner has
misrepresented the true facts and that there was no subsisting arbitration
agreement between the parties in the light of the retirement deed dated
16.8.1990 allegedly executed by the petitioners by which the partnership
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between the parties stood dissolved and all claims stood completely
satisfied. It was also alleged that the petitioners had not come to the Court
with clean hands and had deliberately omitted to mention the fact of their
retirement from the business under the retirement deed.
8. The genuineness of the retirement deed was, however, challenged by
the appellants herein (the petitioners in the petition under Section 20) who
asserted that no retirement deed has been executed by them. According to
the petitioners, the alleged retirement deed was a forged and fabricated
document which was never executed by the petitioners, and which was
prepared to somehow usurp the share belonging to the other partners in the
firm without settling the accounts.
9. By an order dated 1.5.1996, the learned Single Judge hearing the
arbitration petition referred the disputed deed of retirement for examination
and opinion to the Central Forensic Science Laboratory (CFSL). The
document in question was accordingly examined by the CFSL who reported
that the alleged signatures of the petitioners on the alleged retirement deed
were not genuine.
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10. The learned Single Judge held that the plea that there was no dispute
because of the alleged retirement deed and receipts can be easily gone into
by the arbitrator, and in view of the report of the forensic expert between the
parties it cannot be prima facie said that the dispute does not subsist. The
report of the forensic expert creates a substantial doubt in the stand taken by
the respondent of the alleged retirement of the appellant from the
partnership.
11. The learned Single Judge relied on the decision of this Court in
Erach F.D. Mehta vs. Minoo F.D. Mehta AIR 1971 SC 1653 and held
that the arbitration clause in the present case is wide enough to include all
the disputes sought to be referred. Hence the learned single Judge allowed
the petition under Section 20.
12. In appeal, however, the Division Bench of the High Court was of the
view that in case there is a dispute as to the very existence of an arbitration
clause by reason of supersession of the agreement in which the same is
contained by another subsequent agreement arrived at between the parties,
the said dispute cannot be referred to arbitration. The Division Bench hence
set aside the judgment of the learned Single Judge and remanded the matter
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to learned Single Judge for a fresh consideration of the question whether the
alleged retirement deed was never executed between the parties.
13. In our opinion the judgment of the Division Bench cannot be
sustained. It is true that as held by the seven Judge Full Bench decision of
this Court in M/s. S.B.P. & Co. vs. M/s. Patel Engineering Ltd. and
Anr. JT 2005(9) SC 219 (vide para 46) the Chief Justice or the designated
Judge has the right to decide the question of the existence of a valid
agreement and the existence or otherwise of a live claim. However, as
pointed out by this Court in M/s. Shree Ram Mills Ltd. vs. M/s. Utility
Premises (P) Ltd. JT 2007(4) SC 501 (vide para 27) the Chief Justice or his
designate Judge has to examine the claim as to whether the dispute is a dead
one in the sense whether the parties have already concluded the transaction
and have recorded satisfaction of their mutual rights and obligations, or
whether it is still alive. In the same judgment in M/s. Shree Ram Mills
Ltd. vs. M/s. Utility Premises (P) Ltd. (supra) this Court observed:
....................“It is in this sense that the Chief Justice has
to examine as to whether their remains anything to be
decided between the parties in respect of the agreement
and whether the parties are still at issue on any such
matter. If the Chief Justice does not, in the strict sense,
decide the issue, in that event it is for him to locate such
issue and record his satisfaction that such issue exists
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between the parties. It is only in that sense that the
finding on a live issue is given. Even at the cost of
repetition we must state that it is only for the purpose of
finding out whether the arbitral procedure has to be
started that the Chief Justice has to record satisfaction
that their remains a live issue in between the parties. The
same thing is about the limitation which is always a
mixed question of law and fact. The Chief Justice only
has to record his satisfaction that prima facie the issue
has not become dead by the lapse of time or that any
party to the agreement has not slept over its rights
beyond the time permitted by law to agitate those issues
covered by the agreement. It is for this reason that it was
pointed out in the above para that it would be appropriate
sometimes to leave the question regarding the live claim
to be decided by the Arbitral Tribunal.”……………….
(emphasis supplied)
14. It may be mentioned that the decision of this Court in M/s. Patel
Engineering case (supra) and M/s. Shree Ram Mills Ltd. case (supra)
pertained to the Arbitration and Conciliation Act, 1996 and not to the
Arbitration Act of 1940. The present case is governed by the Arbitration
Act of 1940, but in our opinion even if it is governed by the 1940 Act that
will not make any difference in the present case. We are only adopting the
logic in those decisions. The decision of this Court in Damodar Valley
Corporation vs. K.K. Kar AIR 1974 SC 158 (vide para 7) is in our
opinion distinguishable on facts because in that case there was no report of
an expert that the subsequent deed was fake, as is in the present case.
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15. In the present case the learned Single Judge had referred the matter to
a forensic expert who gave a report that the alleged retirement deed dated
16.8.1990 was not genuine and had not been executed by the appellant. On
the basis of this report of the forensic expert, the learned Single Judge
recorded a prima facie satisfaction that the dispute is still alive and deserved
to be referred to the arbitrator.
16. There is no dispute in this case about the validity or existence of the
partnership deed or the arbitration clause therein.
17. In our opinion the learned Division Bench was not correct in holding
that the dispute should not have been referred to the arbitrator in view of the
alleged retirement deed dated 16.8.1990. The very genuineness of the said
retirement deed was challenged and in fact the forensic expert gave a report
that it was not genuine. The learned Single Judge has recorded prima facie
satisfaction that the dispute had not become dead. Hence, in view of the
decision of this Court in M/s. Shree Ram Mills Ltd. vs. M/s. Utility
Premises (P) Ltd. (supra) it would have been appropriate to have left the
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question regarding the genuineness of the alleged retirement deed to be
decided by the arbitrator.
18. In view of the above discussion, we set aside the decision of the
Division Bench and we appoint Mr. Justice D.P. Wadhwa, retired Judge of
the Supreme Court as the sole Arbitrator to decide the dispute between the
parties, including the dispute whether the alleged retirement deed was
genuine or not. Hon’ble Mr. Justice D.P. Wadhwa can fix his own terms of
emoluments and other requirements.
19. The appeal is allowed. No order as to costs. Copy of this judgment
shall be sent forthwith by the Registry of this Court to Hon’ble Mr. Justice
Wadhwa.
…………………………..J.
(Markandey Katju)
………………………….J.
(V.S. Sirpurkar)
New Delhi;
March 26, 2009