Introduction
In an arbitration law decision, the Kerala High Court has ruled that a dispute arising from sale deeds executed between partners as part of their business arrangement is arbitrable, reinforcing judicial support for arbitration as the preferred dispute-resolution mechanism in commercial relationships. The Court dismissed an appeal challenging an arbitral award that dissolved a long-standing partnership, finding that the sale deeds in question did not transfer title in the traditional sense and so did not fall outside the scope of arbitration under the Arbitration and Conciliation Act, 1996.
Facts of the Case
The dispute began when partners in a longstanding business arrangement executed sale deeds among themselves. Although registered as sale instruments, the deeds were, in substance, part of the economic understanding between the partners and not intended to reflect absolute and independent transfers of title to third parties. When disagreements arose over entitlements, one party invoked the arbitration clause contained in the relevant partnership documents and agreements, triggering arbitral proceedings to dissolve the partnership and resolve competing claims. An arbitral tribunal ultimately issued an award dissolving the partnership and determining rights.
Aggrieved by the arbitral award, the losing party filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, asking the Kerala High Court to set aside the award on the basis that the subject dispute was not arbitrable. The appellant argued that the dispute involved registered sale deeds and rights in immovable property, matters traditionally within the exclusive jurisdiction of civil courts and not suitable for arbitration. In particular, it was contended that disputes over sale deeds affected rights in rem, rights enforceable against the world at large, which, according to the appellant, cannot be relegated to arbitration.
What Court Says
The High Court rejected the appeal and declined to interfere with the arbitral award. The Court held that the true nature and intent behind the executed sale deeds, as part of an internal business arrangement between partners, did not make the dispute non-arbitrable. Rather, the sale deeds were commercial instruments connected to the partners’ relationship, and the disagreements arose from contractual obligations among them, making the dispute fit squarely within the scope of arbitration agreed by the parties. The Court emphasized that where parties have voluntarily agreed to arbitration, courts should respect that choice, subject to the limited grounds for judicial intervention provided in the Arbitration Act.
In reaching its decision, the Kerala High Court aligned with the overarching pro-arbitration thrust of Indian arbitration jurisprudence. Indian courts, including High Courts and the Supreme Court, have increasingly recognized that disputes rooted in contractual relationships and private agreements, even when they touch on immovable property issues, are arbitrable if the rights are in personam (between the parties) and the arbitration agreement is valid. This approach ensures commercial disputes are resolved by the mechanism chosen by the parties, reduces judicial backlog, and upholds party autonomy in dispute resolution.
Implications
The Court’s ruling carries several important implications. First, it clarifies that the presence of sale deeds between partners does not automatically render a dispute non-arbitrable simply because the instruments are registered or involve real estate-type transactions. Instead, the substantive character of the rights and the parties’ intent determine arbitrability. Second, the decision reinforces judicial deference to arbitration awards and limits the scope of appeals under Section 37 of the Arbitration Act, courts will not readily interfere with awards unless statutory grounds for setting aside are clearly established. Third, the judgment encourages commercial entities and business partners to rely more confidently on arbitration clauses in their agreements, knowing that Indian courts will uphold their consensual dispute-resolution framework.
