The judgement in the case of Tarun Dhameja v. Sunil Dhameja & Anr. was delivered by CJI Sanjiv Khanna and Justice Sanjay Kumar. This case revolved around the interpretation and enforceability of an arbitration clause in a Partnership Deed wherein the central issues pertained to whether the arbitration clause was optional or mandatory and whether legal representatives of a deceased partner could invoke arbitration.
The arbitration clause in the said Partnership Deed which was before the court for consideration read as “That if at any time either during the continuance of the partnership or after the retirement of any partner, any dispute or difference shall arise between the partners or their respective heirs or any one claiming through or under them, the same shall be referred to arbitration. Arbitration shall be optional & the arbitrator will be appointed by partners with their mutual consent. In any case of dispute arise then the Jurisdiction of Indore Civil Court shall be applicable & acceptable by the partners.”.
The appellant Tarun Dhameja (as legal heir of the deceased partner Yeshwant Boolani) invoked the arbitration clause which was resisted and contested by the respondents.
The Supreme Court while interpreting the said arbitration clause held that the first portion of the clause was clear in that the same stated that legal representatives or anyone claiming through a partner could invoke the arbitration clause. Further, as regards the second portion of the clause, the court clarified that the term "optional" only pertained to appointing an arbitrator through mutual consent, rather than nullifying the arbitration clause itself. The court emphasized that a broad interpretation of arbitration clauses should prevail to promote dispute resolution.
Where mutual consent for appointing an arbitrator could not be achieved, the court retained the authority under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator. The court differentiated this case from earlier rulings in Wellington Associates Ltd. v. Mr. Kirit Mehta and Jagdish Chander v. Ramesh Chander, noting that the language of the arbitration clauses in those cases was completely different.
The Supreme Court set aside the High Court’s judgment and allowed the appeal. It directed the Madhya Pradesh Arbitration Centre to appoint an arbitrator to adjudicate the dispute. The court clarified that it made no observations on the merits of the parties’ claims and emphasized the need for arbitration clauses to be interpreted pragmatically to uphold parties' intentions.