Clarifying the Path to Arbitration: Court Upholds Dispute Resolution in Partnership Agreement.


06 December 2024 Arbitration Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law  

The case of Tarun Dhameja v/s Sunil Dhameja & Another concerns a dispute between partners in a partnership governed by a deed dated 16.07.2016, which included an arbitration clause. The arbitration clause stated that disputes arising during the partnership or after the retirement of any partner should be referred to arbitration. It also mentioned that the arbitration was optional and required mutual consent of the partners to appoint an arbitrator.

The court, referring to previous cases, clarified that while the arbitration clause mentioned mutual consent, it was not optional in the sense that the dispute could not be referred to arbitration at all. The court noted that the clause allowed for arbitration to be invoked by any party, including the legal representatives of deceased partners, and that mutual agreement was necessary only for appointing the arbitrator. If the parties could not agree on an arbitrator, the court could intervene and appoint one.

 
 

The ruling emphasized that the intent of the partnership deed's arbitration clause was to provide a mechanism for resolving disputes, even if the partners or their representatives could not agree on the specifics. The court rejected the argument that the arbitration clause was non-binding or nonexistent due to its phrasing.


The appeal was allowed, the lower court’s judgment was set aside, and the petition under Section 11(6) of the Arbitration and Conciliation Act was granted. The Chairman of the Madhya Pradesh Arbitration Centre was directed to appoint an arbitrator for resolving the disputes. The fees of the arbitrator would be fixed as per the relevant provisions of the Act. The court clarified that it had not commented on the merits of the case.


Arbitration and Conciliation Act, 1996