VIJAY KUMAR SHARMA @ MANJU v.

RAGHUNANDAN SHARMA @ BABURAM & ORS. (Civil Appeal No. 89 of 2010)

JANUARY 5, 2010 [R.V. Raveendran and K.S. Radhakrishnan, JJ.]

2010 (1) SCR 582

The Order of the Court was delivered by

ORDER

R.V. RAVEENDRAN, J. 1. Leave granted. Heard the learned counsel.  

2. The first respondent and appellant are brothers. The first respondent  

filed a suit (Civil Suit No.100 of 2006) against the appellant alleging that their  

father  Durganarayan  Sharma  died  on  20.10.2005  leaving  a  will  dated  

21.10.2003 bequeathing portions of property bearing No.B-133, Bapu Nagar,  

Jaipur (for short the suit premises) to him, and that the appellant who was in  

possession of the said portions, was liable to deliver possession thereof to  

the first respondent on the basis of the said will. The Executors of the said will  

were impleaded as defendants 2 and 3 (respondents 2 and 3 herein).  

3. The appellant herein, in turn filed a Civil Suit No.53 of 2007 for partition  

and separate possession of his one-sixth share in the ancestral properties.  

He also sought a declaration that the will dated 21.10.2003 propounded by  

the first respondent was fabricated, null and void. In the said partition suit,  

first  respondent  and  his  son  were  impleaded  as  defendants  1  and  6;  

appellant’s another brother and three sisters were impleaded as defendants 2  

to 5; the son of another brother who had been given away in adoption was  

impleaded  as  defendant  no.7;  and  the  executors  under  the  will  were  

impleaded as defendants 8 and 9.

4. The two suits were consolidated for trial. Respondents 2 and 3 claiming  

to be the executors of the will of Durganarayan Sharma filed an application

under section 8 of the Arbitration & Conciliation Act, 1996 (‘Act’ for short) in  

the said suits alleging that the deceased Durganarayan Sharma had made a  

declaration on 15.10.2005,  shortly  before his  death,  that  if  there was any  

dispute in connection with the will, the same should be decided by Shri U.N.  

Bhandari,  Advocate;  that  the  parties  to  the  two  suits  being  children  and  

grandchildren of Durganarayan Sharma were bound by the said declaration  

and  the  disputes  which  were  the  subject  matter  of  the  two  suits  should  

therefore be decided by arbitration. The trial court heard the said application  

and by order dated 19.9.12007, held that in view of the said provision for  

resolution  of  disputes  by  arbitration,  its  jurisdiction  was  barred  by  the  

provisions of the Act. Consequently, the trial court dismissed both the suits,  

under Order 7 rule 11 of the Code of Civil Procedure (‘Code’ for short).  

5. Feeling aggrieved by the order dated 19.9.2007, the appellant herein  

filed an appeal (SB Civil Appeal No.664 of 2007) contending that there was  

no agreement for arbitration and that there was no ground for dismissal of his  

suit  and a Division Bench of the High Court,  while issuing notice to show  

cause  why  the  appeal  should  not  be  admitted,  stayed  the  order  dated  

19.9.2007 passed by the trial court, by order dated 14.11.2007.

6. The first respondent accepted the decision of the trial court and filed a  

claim statement on 20.10.2007 before Shri U.N. Bhandari, the sole Arbitrator  

named in the declarations of his father, the reliefs earlier sought by him in  

Civil  Suit  No.  100/2006.  The  said  U.N.  Bhandari  issued  notices  to  the  

appellant  and  other  non-petitioners  in  the  claim.  The  appellant  appeared  

before  Shri  U.N.  Bhandari,  and  objected  to  his  jurisdiction  to  act  as  an  

arbitrator, contending that there was no arbitration agreement between the  

parties. He also pointed out that neither he nor first respondent had signed  

the declaration of his father giving consent to Shri U.N. Bhandari being the  

Arbitrator. He also brought to the notice of Shri Bhandari, that the order dated  

19.9.2007 passed by the trial court had been stayed by the High Court. He  

also challenged the continuation of Shri Bhandari as an arbitrator by alleging

bias  against  him.  In  these  circumstances  on  17.11.2007,  Shri  Bhandari  

withdrew himself from the arbitrator. On such withdrawal, the first respondent  

filed an application under section 11(6) read with section 14(1)(b) and 15(2)  

of the Act for appointment of an independent arbitrator. The designate of the  

Chief  Justice  who  heard  the  matter,  allowed  the  said  application  by  the  

impugned order dated 16.5.2008, and appointed an Arbitrator to resolve the  

disputes. The said order is challenged in this appeal by special leave.  

7. The first contention raised by the appellant is that when the question  

(whether there is a valid arbitration agreement between the appellant and first  

respondent)  is  pending consideration by the High Court  in  S.B.  Civil  First  

Appeal No.664 of 2007, the designate of the Chief Justice could not have  

entertained or decided an application under Sections 11, 14 and 15 of the Act  

involving the same question. It is submitted that the order of the trial court  

dated  19.9.2007  holding  that  the  parties  should  resolve  their  disputes  by  

arbitration had been stayed by the High Court in the pending appeal. In view  

of the pendency of S.B. Civil first Appal No.664 of 2007 and the interim stay  

of the order dated 19.9.2007, granted by the High Court on 14.11.2007, the  

appellant submitted that the learned designate of the Chief Justice ought not  

to  have  proceeded  to  decide  the  application  for  appointment  of  a  fresh  

arbitrator, but ought to have awaited the decision in the first appeal. It was  

submitted that in the pending first appeal (against the decision dismissing his  

suit under Order 7 Rule 11 of the Code), if it is held that there is no arbitration  

agreement between the parties or if the court refuses to refer the parties to  

arbitration,  the  suits  will  have  to  proceed  and  that  will  lead  to  conflicting  

decisions.

8. Section 8 of the Act which is relevant is extracted below:

“8.  Power  to  refer  parties  to  arbitration  where  there  is  an  arbitration  

agreement. – (1) A juridical authority before which an action is brought in  

a matter which is the subject of an arbitration agreement shall, if a party

so  applies  not  later  than  when  submitting  his  first  statement  on  the  

substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained  

unless it is accompanied by the original arbitration agreement or a duly  

certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section  

(1)  and  that  the  issue  is  pending  before  the  judicial  authority,  an  

arbitration may be commenced or continued and an arbitral award made.”

9. It is evident from sub-section (3) of section 8 that the pendency of an  

application under section 8 before any court will not come in the way of an  

arbitration being commenced or continued and an arbitral award being made.  

The obvious intention of this provision is that neither the filing of any suit by  

any party to the arbitration agreement nor any application being made by the  

other party under section 8 to the court, should obstruct or preclude a party  

from initiating any proceedings for appointment of an arbitrator or proceeding  

with the arbitration before the Arbitral Tribunal. Having regard to the specific  

provision in section 8(3) providing that the pendency of an application under  

section 8(1) will not come in the way of an arbitration being commenced or  

continued, we are of the view that an application under section 11 or section  

15(2)  of  the  Act,  for  appointment  of  an  arbitrator,  will  not  be  barred  by  

pendency of an application under Section 8 of the Act in any suit, nor will the  

Designate of the Chief Justice be precluded from considering and disposing  

of an application under Section 11 or 15(2) of the Act. It follows that if an  

arbitrator is appointed by the Designate of the Chief Justice under section 11  

of the Act, nothing prevents the arbitrator from proceeding with the arbitration.  

It  also  therefore  follows  that  the  mere  fact  that  an  appeal  from an  order  

dismissing  the  suit  under  Order  7  Rule  11  CPC (on  the  ground  that  the  

disputes require to be settled by Arbitration) is pending before the High Court,  

will not come in the way of the appointment of an arbitrator under section 11

read with section 15(2) of the Act, if the Authority under section 11 finds it  

necessary  to  appoint  an  Arbitrator.  Therefore  the  first  contention  of  the  

appellant is liable to be rejected.

10. The appellant next contended that the parties to the dispute have not  

entered into an arbitration agreement,  there is no arbitration agreement in  

existence as contemplated under section 7 of the Act, and the Authority under  

section 11 of the Act was not justified in appointing an arbitrator.  

11. The learned Designate held that an arbitration agreement need not be  

signed by the parties and if a provision for arbitration is incorporated by a  

Testator in his Will, such a provision will be binding on his children/legatees,  

after his death. He held that a provision in a Will providing for arbitration, in  

the event of a dispute among the legatees, is an arbitration agreement under  

section  7  of  the  Act,  for  the  purposes  deciding  any  disputes  among  the  

legatees. He relied upon a decision of the Calcutta High Court in Raj Kumar  

v. Shiva Prasad Gupta - [AIR 1939 Cal. 500] where it was observed that a  

father  has the power to  refer  to  arbitration the disputes relating to  a joint  

family property, provided such reference was for the benefit of the family, and  

that an award made by an arbitrator upon such reference, will  be binding  

upon all members of the family, including any minors.

12. We are of the view that the said decision has no relevance to the  

question on hand and at all  events, is not of any assistance to determine  

whether there was any arbitration agreement, as contemplated under section  

7  of  the  Act.  Section  7  defines  ‘arbitration  agreement’  as  meaning  an  

agreement by the parties to submit to arbitration all or certain disputes which  

have arisen or which may arise between them in respect of a defined legal  

relationship, whether contractual or not. Sub-sections (2) and (3) of section 7  

require that an arbitration agreement shall be in writing (whether it is in the  

form  of  an  arbitration  clause  in  a  contract  or  in  the  form  of  a  separate  

agreement). Sub-section (4) of section 7 enumerating the circumstances in

which  an  arbitration  agreement  will  be  considered  as  being  in  writing,  is  

extracted below:  

“7(4). An arbitration agreement is in writing if it is contained in -

(a) a document signed by the parties;  

(b)  an  exchange  of  letters,  telex,  telegrams  or  other  means  of  

telecommunication which provide a record of the agreement; or

(c)  an  exchange  of  statements  of  claim  and  defence  in  which  the  

existence of the agreement is alleged by one party and not denied by the  

other.  

13. In this case, admittedly, there is no document signed by the parties to  

the dispute, nor any exchange of letters, telex, telegrams (or other means of  

telecommunication)  referring  to  or  recording  an  arbitration  agreement  

between the parties.  It  is also not in dispute that there is no exchange of  

statement  of  claims  or  defence  where  the  allegation  of  existence  of  an  

arbitration agreement by one party is not denied by the other. In other words,  

there is no arbitration agreement as defined in section 7 between the parties.  

In  Jagdish Chander vs. Ramesh Chander – 2007 (5) SCC 519, this Court  

held:  

“The existence of an arbitration agreement as defined under section 7 of  

the  Act  is  a  condition  precedent  for  exercise  of  power  to  appoint  an  

arbitrator/Arbitral Tribunal, under section 11 of the Act by the chief Justice  

or his designate. It is not permissible to appoint an arbitrator to adjudicate  

the  disputes  between  the  parties,  in  the  absence  of  an  arbitration  

agreement of mutual consent.”  

14. While the respondents rely upon the Will,  the appellant denies the  

existence of any such Will. The validity of the Will is pending consideration in  

the two civil suits filed by the appellant and the first respondent, referred to  

above.  The  alleged  Will,  admittedly,  does  not  contain  any  provision  for  

arbitration,  though the learned Designate has proceeded on an erroneous

assumption that the Will provides for arbitration. Even if the Will had provided  

for reference of disputes to arbitration, it would be merely an expression of a  

wish by the testator  that the disputes should be settled by arbitration and  

cannot be considered as an Arbitrator agreement among the legatees. In this  

case, according to the respondents, the provision for arbitration is not in the  

Will  but  in  a  subsequent  declaration  allegedly  made  by  Durganarayan  

Sharma,  stating  that  if  there  is  any  dispute  in  regard  to  his  Will  dated  

28.12.2003, it shall be referred to his friend, U.M. Bhandari, Advocate, as the  

sole arbitrator whose decision shall  be final  and binding on the parties.  A  

unilateral  declaration by a father that any future disputes among the sons  

should  be  settled  by  an  arbitrator  named  by  him,  can  by  no  stretch  of  

imagination, be considered as an arbitration agreement among his children,  

or  such of  his children who become parties to a dispute.  At  best,  such a  

declaration can be expression of a fond hope by a father that his children, in  

the event of a dispute, should get the same settled by arbitration. It is for the  

children, if  and when they become parties to a dispute, to decide whether  

they would heed to the advice of their father or not. Such a wish expressed in  

a  declaration  by  a  father,  even  if  proved,  cannot  be  construed  as  an  

agreement in writing between the parties to the dispute agreeing to refer their  

disputes to arbitration.  

15. We are therefore of the view that there is no arbitration agreement  

between the parties and the learned Designate committed a serious error in  

allowing the application under sections 11 and 15(2) of the Act and holding  

that there is an arbitration agreement between the parties to the dispute and  

appointing an arbitrator.  

16. What has been considered and decided above is only the question  

whether there is an arbitration agreement or not. We have not examined or  

recorded  any  finding  as  to  the  existence  or  validity  of  the  Will  dated  

21.10.2003 or the declaration dated 15.10.2005 said to have been made by

Mr. Durganarayan Sharma, propounded by the respondents and denied by  

the appellant.  

17. In view of the foregoing, this appeal is allowed and the impugned order of the  

Designate of the Chief Justice appointing an Arbitrator is set aside.