http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

CASE NO.: Appeal (civil)  814 of 2007

PETITIONER: Vipin Kumar Gadhok

RESPONDENT: Ravinder Nath Khanna & Ors

DATE OF JUDGMENT: 19/02/2007

BENCH: Tarun Chatterjee & R V Raveendran

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No.3692 of 2006)

RAVEENDRAN, J.

Leave granted.  This appeal by special leave is filed against the order  dated 27.10.2005 passed by the Delhi High Court under section  11 of the Arbitration and Conciliation Act, 1996 (’Act’ for  short) in Arbitration Application No.200 of 2005 and the order  dated 9.12.2005 rejecting the application for review.  

2.      The appellant and respondents 3 and 4, carrying on  business in partnership under the name and style of ’Matchless  Industries of India’ (5th respondent herein), entered into a  partnership with Respondents 1 and 2, as per deed of   partnership dated 1.3.1995 to carry on the business under the  name and style of M/s. Controls and Matchless Industries.     Appellant, Respondent No. 3 and Respondent No. 4 as partners  of ’Matchless Industries of India’ were together shown as the  first party to the partnership and Respondents 1 and 2 together  were shown as the second party to the partnership. Clause (14)  thereof provided for settlement of disputes among the partners  by arbitration and the same is reproduced hereinbelow :

"Any dispute or difference which may arise between the  partners or their representatives with regard to the  construction, meaning and effect to this deed or any part  thereof or respecting the accounts, profit or losses of the  business or the rights and liabilities of the partners under  this deed or the dissolution or winding up of the business of  the partnership or any other matter relating to the firm shall  be referred to arbitration of sole arbitrator in accordance  with the provisions of the Indian Arbitration Act."

3.      The said firm was dissolved as per deed dated  24.12.2001. It is stated that certain disputes arose between the  parties in connection with certain claims by Respondents 1 and  2 on dissolution of the said firm of M/s Controls and Matchless  Industries.  Respondents 1 and 2 sent a communicated dated  22.8.2003 to the appellant and respondents 3 to 5 seeking  ’accounts’. The fourth respondent sent a letter dated 17.12.2003  on the letterhead of ’Matchless Industries of India’ stating that  he would ensure that a sum of Rs.53,81,585/- is paid to  respondents 1 and 2. Thereafter, respondents 1 and 2 sent a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

notice dated 27.6.2005 to appellant and respondents 3 to 5,  claiming that the amounts mentioned therein were due to them  and sought concurrence for the appointment of Mr. Abhinav  Vasisht, Advocate, as sole arbitrator, to decide the dispute. The  appellant sent a reply dated 21.7.2005 contending that there  cannot be any arbitration as the Dissolution Deed did not  contain any arbitration clause.

4.      Respondents 1 and 2, therefore, filed Arbitration  Application No.200/2005 in the Delhi High Court under  Section 11 of the Act for appointing the person suggested by  them or any other person as the sole arbitrator for adjudicating  the disputes between them and the respondents therein. The  Appellant and Respondents 3 to 5 herein were arrayed as  respondents 1 to 4 in the said Arbitration Application.

5.      The said application was resisted on the ground that the  firm of Matchless Industries of India (4th Respondent in the  arbitration application) was not a party to the agreement for  arbitration and therefore the application was not maintainable.  The existence of arbitration clause in so far as Respondents 1 to  3 before the High Court and receipt of notices were not  disputed. The said objection was raised only during arguments  and no formal objections were filed. The High Court by order  dated 27.10.2005 allowed the said application and appointed  Justice C L Choudhary (Retd.) and sole Arbitrator, with an  observation that the question whether the disputes were  arbitrable or not could be raised before the arbitrator and can be  decided under Section 16 of the Act.

6.      Thereafter the appellant herein filed a review petition  dated 7.12.2005 contending that having regard to the decision  of this Court  in S B P & Co. v. M/s. Patel Engineering Ltd.  [2005 (9) SCALE 1], the High Court should decide the question  whether any dispute involving ’Matchless industries of India’  could be referred to arbitration. The High Court rejected the  review application on 9.12.2005.  

7.      The only contention urged by the Appellant in this appeal  is that the High Court ought to have decided the contention  relating to non-arbitrability of disputes with reference to  ’Matchless Industries of India’, instead of leaving it to the  Arbitrator for decision under section 16.  It is submitted that  section 16 will not apply where the Arbitrator is appointed by  the court under section 11.

8.      It is no necessary to examine the scope of section 16 of  the Act. We find that the observation by the High Court that  Arbitrator can decide whether the disputes arbitrable or not  under section 16 of the Act was really redundant, as it had in  fact considered the objection and decided the question as  follows :  

"It may be noticed that the agreement dated 1st March,  1995 entered into between the parties in various clauses of  the agreement makes reference to the partnership concern.  The name of M/s Matchless Industries of India has also  been referred to in the recital of the agreement. Respondent  No. 4 in fact, was a partnership concern constituting of the  three persons who are signatories to this agreement.  Clauses no. 10 to 13 do make a reference to his partnership.  

In these circumstances, at this stage and at least prima  facie, the objection raised on behalf of the respondents  cannot hold the ground.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3  

The arbitration clause is not disputed between respondents  no. 1 to 3 who are partners of respondent no. 4 and the  transaction related to the affairs of the said partnership  concern."  

The use of the words ’prima facie’ in the order dated  27.10.2005 and the observation that Arbitrator can decide about  arbitrability of the dispute in the order dated 9.12.2005 while  rejecting the review application, have led to this appeal.  

9.      The appellant and respondents 3 and 4 as partners of  ’Matchless Industries of India’ entered into a partnership with  respondents 1 and 2 to carry on the business under the name  and style of ’Control & Matchless Industries’ as per the Deed  dated 1.3.1995 and the said Deed admittedly contains a  provision for settlement of disputes by a sole arbitrator. The  only grievance of the appellant before the High Court and this  Court is that ’Matchless Industries of India’ - 4th respondent  before the High Court and fifth Respondent before this Court -   not being a party to the said partnership deed dated 1.3.1995  containing the arbitration agreement, there could not be a  reference to arbitration with reference to ’Matchless Industries  of India’.

10      The Partnership Deed dated 1.3.1995 is entered between  ’Mangat Rai Gadhok, Suman Kumar Gadhok and Vipin Kumar  Gadhok, carrying on business in partnership under the name  and style of Matchless Industries of India’ as the first party and  ’R. N. Khanna and Ashok Khanna’ together as the second  party.  It is seen that even in the Dissolution Deed dated  24.12.2001, the first party is described as ’Mangat Rai Gadhok,  Suman Kumar Gadhok, Vipin Kumar Gadhok, carrying on  business in partnership under the name and style of Matchless  Industries of India’. The firm of  Matchless Industries of India  was impleaded as fourth respondent in the arbitration  application, as the first party under the deed dated 1.3.1995,  was the three partners of  Matchless Industries of India carrying  on business under the name and style of Matchless Industries of  India. Therefore when a disputes arose between the partners of   ’M/s Controls and Matchless Industries’, that is between ’R. N.  Khanna and Ashok Khanna’ who were the second party under  the deed of partnership, with ’Mangat Rai Gadhok, Suman  Kumar Gadhok, Vipin Kumar Gadhok carrying on business in  partnership under the name and style of  Matchless Industries of  India’, who were the first party under the said deed dated  1.3.1995, there is nothing wrong in arraying Mangat Rai  Gadhok, Suman Kumar Gadhok, Vipin Kumar Gadhok and  Matchless Industries of India as Respondents 1 to 4 in the  arbitration application. The High Court has rightly allowed the  application for appointment of sole Arbitrator, to decide the  disputes between Applicants 1 and 2, and Respondents 1 to 4,  before it.  

11.     There is, therefore, no question of Arbitrator examining  whether the disputes are arbitrable or not with reference to  Matchless Industries of India. With the said clarification, the  appeal is dismissed.