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

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