The Madras High Court has reiterated that when a arbitration agreement is in the form of a clause/covenant in a contract, the termination or effacing of the Contract does not terminate or efface the arbitration agreement.
The single-judge bench of Justice M. Sundar observed that arbitration clause contained in a partnership deed survives the termination of the deed as it is an independent contract.
In the present petition, the parties entered into a partnership deed which had an arbitration clause. After the respondent left, a new deed was constituted and the parties entered into an amended deed. Disputes arose between them regarding the distribution of properties and income generated by the firm.
Mediation between the parties failed and the petitioner sought appointment of an arbitrator as per the clause.
The petitioner contended that the clause in the Primary Contract is 'Arbitration Agreement' within the meaning of Section 2(1)(b) read with Section 7 of A & C Act and captioned Arb.OP is predicated on the said arbitration agreement.
The respondent, on the other hand objected to maintainability of the petition on the ground:
(a) The primary contract got effaced owing to 'Sammatha Pathiram'
(b) The claim of the petitioners is assertion of a right in rem i.e., right to title qua properties and therefore is not arbitrable.
(c) The arbitration clause is no arbitration clause as it talks about Arbitration Act, 1940 which was not in vogue on the date of primary contract
The Court analysed all the above three.
The Court noted that the law is well settled that when a arbitration agreement between contracting parties is in the form of a clause/covenant in a contract, the termination or effacing of the Contract does not terminate or efface the arbitration agreement. It refferred to M/s. Reva Electric Car Co. P. Ltd. Vs. M/s. Green Mobil, 2011 Latest Caselaw 865 SC,
It added that it is also the obtaining legal position.
"When arbitration agreement is in the form of a clause/covenant in another contract, it will still be an independent contract, it will outlive the termination of the main contract."
Further, the Court noted that some of the disputes are not arbitrable disputes which can always be raised before the Arbitral Tribunal inter alia under Section 16 after the pleadings with specificity are made. The Court stated that Section 11 of Arbitration and Conciliation Act does not permit elaborate pleadings on the claims.
Whenever a question as to whether a particular clause will qualify as an arbitration agreement arises, the lead case law which serves as touch stone is K.K.Modi v. K.N.Modi and Others wherein Supreme Court culled out from the A & C Act and laid down three determinants to decide whether an agreement would qualify as an arbitration agreement. These three determinants are
(i).Existence of disputes as against intention to avoid future disputes;
(ii).The tribunal or forum so chosen is intended to act judicially after taking into account relevant evidence before it and the submissions made by the parties before it;
(iii).The decision is intended to bind the parties.
In view of the above, the Court noted that the nomenclature or language takes a tertiary position qua determinant, the primary determinant is the intention of the parties to resort to ADR and another primary/secondary determinant is parties intention to judicially resolve the matter in and by a private Tribunal namely Arbitral Tribunal. In the case on hand, this Court is unable to persuade itself to believe that the aforementioned clause 15 does not qualify as an arbitration agreement as it is clear that the intention of the parties was to settle the disputes, if any by resorting to arbitration.
Case Title: M/s.Rajasthani Marble vs Na.K.Kumar Son of N.Kuppurathinam
Case Details: Arb.O.P (Com.Div).No.73 of 2021
Coram: Justice M. Sundar
Read Judgement @LatestLaws.com:
