Shri Dhan Prakash Gupta And Others vs Shri Kedar Nath Gupta And Others
2009 Latest Caselaw 2909 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
                                             DECIDED ON: 29.07.2009
+              CS (OS) 1670/2007, I.A.-3453/2008

      SHRI DHAN PRAKASH GUPTA AND OTHERS                         ..... Plaintiffs
                    Through: Mr. K. Sunil, Advocate.

                   versus

      SHRI KEDAR NATH GUPTA AND OTHERS                          ..... Defendants
                    Through: Mr. Sunil Mittal with
                    Ms. Sonia Arora, Advocates.


      CORAM:
      HON'BLE MR. JUSTICE S. RAVINDRA BHAT

1.

Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to Reporter or not?

3. Whether the judgment should be reported in the Digest?

S.RAVINDRA BHAT, J. (OPEN COURT)

% I.A.-3453/2008 (U/S-8 of Arbitration and Conciliation Act)

The defendants have preferred this application contending that the Suit

is not maintainable by reason of existence of an arbitration clause.

The plaintiffs sue the defendants, inter alia, for declaration that the

action of some of them in transferring movable and immovable properties of the

seventh plaintiff trust is null and void; consequently injunctive relief, both

permanent and mandatory, is sought. The plaintiffs also request for

appointment of receiver to take the charge of the affairs and management of

the seventh plaintiff trust.

The defendants/applicants argue that plaintiff No.1 and defendant No.1

CS (OS) 1670/07 Page 1 are signatories to the trust which constituted the seventh plaintiff on

3.10.1985. Apparently, the settlement deed dated 27.8.1997 altered the scope

of the Trust. It is contended that the disputes that are the subject matter of

the present case have a direct bearing on the day to day functioning and

management of the affairs of the seventh plaintiff trust. The applicants rely

upon Clause-13 of such document which is in the following terms: -

"Clause-13 - The trustees shall have full power to compromise or compound all actions, suits and other proceedings and all differences and disputes touching the trust and, or the trust property or trust affairs and to refer any such differences or disputes to Arbitration and to adjust and settle all accounts relating to the Trust and/or the Trust properties and to do all other acts and things as fully and effectively, as if they were absolutely entitled to do the same without being liable or answerable for any loss occasioned thereby."

It is contended that though not happily worded, the stipulation fulfills all

the requirements of an arbitration agreement that binds the parties to have the

disputes resolved through arbitration.

Learned counsel for the applicant relied upon judgment of the Supreme

Court reported as Nandan Biomatrix Ltd. v. D-1 Oils Ltd. 2009 (4) SCC 495 to

state that the essentials of what constitute an arbitration agreement are

present in Clause-13. It is submitted that in these circumstances, the Suit is

not maintainable and should be rejected as barred by virtue of Section-8 of the

Arbitration and Conciliation Act.

The plaintiffs' position vis-à-vis the application is that the Clause-13 is

not a binding arbitration agreement. It is submitted that at best, arbitration is

enabled, but is not compulsive since there is no obligation cast on the parties CS (OS) 1670/07 Page 2 to necessarily have the disputes resolved through arbitration. Learned counsel

further contended that there is no indication that the parties affected by any

decision of the Trust or aggrieved by any dispute relating to the Management of

the Trust, are barred from approaching the Civil Court and that in any event,

the Clause does not advert to the Arbitration and Conciliation Act, 1996.

As is evident, Clause-13 is in two parts; the first spells out the power of

the Trustees to compromise or compound "all actions, Suits and other

proceedings". The second part, which is vital for resolving the present

controversy read as follows: -

"All differences and disputes touching the Trust or Trust property or Trust affairs and to refer any such differences or disputes to arbitration"

The Court while considering application under Section-8 of the

Arbitration and Conciliation Act has to see the intention of the parties. Perhaps

the matter is compounded by the fact that not merely dispute resolving

mechanism but other powers of the trustees are also discussed in Clause-13,

such as the power to compound disputes etc. Nevertheless the expressed

advertence to "differences and disputes touching the trust" in relation to the

subject matter of the latter part of the clause i.e. arbitration, brings out with

sufficient clarity the intention of the settlers that disputes of the kind which are

sought to be agitated here are to be arbitrated.

Section-7 of the Arbitration Act clarifies for a condition to be deemed as

arbitration clause agreement, that it should be in writing and contained in a

document signed by the parties. Section-7 (2) further states that an arbitration CS (OS) 1670/07 Page 3 agreement may be in the form of the arbitration clause for a contract or in a

form of a separate agreement. In Rukmani Bai Gupta v. Collector, Jabalpur and

Ors. 1980 (4) SCC 556, the Court observed that if the parties state that

disputes arising between them in respect of the subject matter of the contract

would be referred to arbitration, then arrangement would spell out the

arbitration agreement. Taking a cue from this, Supreme Court later in M.

Dayanand Reddy v. Industrial Infrastructure Corporation Ltd. & Ors. 1993 (3)

SCC 137 stated that an arbitration clause need not be in a specified form and

that what is important is intention of the parties to refer the disputes if

inferable with clarity. All these were considered and applied in Nandan Bio

Matrix (supra).

In the present case, although the condition concerned i.e. clause-13 talks

of more than one idea, yet the intention to have the disputes or differences

touching upon the Trust or trust property or its affairs settled through

arbitration is clearly borne out.

In the circumstances, the Court is of opinion that application deserves to

be allowed.

CS (OS) 1670/2007

In view of the above finding, the Suit is rejected as not maintainable,

leading the parties to seek their remedies for appointment of Arbitrator in

accordance with law.

JULY 29, 2009                                           S. RAVINDRA BHAT
                                                              (JUDGE)
CS (OS) 1670/07                                                           Page 4