2015 Supreme(Bom) 1482

IN THE HIGH COURT OF BOMBAY
S.J. Kathawalla, J.
Dattatray N. Sawant and Ors. – Appellant
Vs.
Nitida A. Mehta and Ors. – Respondent
Arbitration Application No. 47 of 2014
Decided On: 15.04.2015

Headnote:Arbitration and Conciliation Act, 1996 - Sections 2(1)(b), 7 and 11 Arbitration clause in partnership deed. - If partnership stood dissolved, it cannot be held that arbitration clause cannot operate and that same has perished along with original contract who has no legal existence and therefore, an application filed under Section 11 of the Act would be heard. It is alleged that these facts clearly demonstrate that there is no relationship existing between the parties as partners, and in view of the fraud and criminal offences being involved, the matter cannot be referred to arbitration. Just because the respondents have made allegations of fraud etc. against the applicants, it cannot be held that the matter cannot be referred to arbitration. It is pertinent to mention in this context that in a recent decision of the Hon’ble Supreme Court in Swiss Timing Ltd. v. Organising Committee, Commonwealth Games 2010, Delhi, 2014 (6) SCC 677 : 2014 All SCR 2672, the Hon’ble Supreme Court observed that there is no inherent risk to the parties in permitting arbitration to proceed, even with criminal proceedings running simultaneously. In view thereof, this contention of the respondents is also rejected.

       Arbitration and Conciliation Act, 1996 - Section 11 Application Admissibility of. - If an application under Section 11 of the Act is made, there is no inherent risk to parties in permitting arbitration to proceed even without criminal proceedings running simultaneously. There is nothing on record, to show that the parties have agreed that the partnership firm would stand dissolved or has ceased to exist from the year 1998. In fact in clause (d) of para 17 of the affidavit-in-reply filed on behalf of the respondents, it is admitted that along with the partnership deed dated 21st January, 1990, a power of attorney dated 22nd January, 1990 was also executed by the respondents in favour of applicant No. 1 and one ’B’. The said power of attorney was revoked by the respondents only after the applicants invoked arbitration through their Advocates letter dated 20th December, 2010 as per Clause 23 of the Partnership Deeds dated 1st April, 1989 and 21st January, 1990. In fact, even if the partnership stood dissolved as alleged, it cannot be held that the arbitration clause cannot operate and that the same has perished along with the original contract which has no legal existence. In view thereof the submission advanced on behalf of the respondents that there does not exist any valid and legally enforceable arbitration agreement, and therefore the above application is misconceived cannot be accepted and is rejected.

       Arbitration and Conciliation Act, 1996 - Section 11 Appointment of arbitrator as per deed of partnership Validity of. - Though property belonging to the partnership is within the jurisdiction of the Slum Rehabilitation Authority under Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, yet an application moved under Section 11 of Arbitration and Conciliation Act, 1996 could be entertained. Since redevelopment of the property belonging to the partnership is within the jurisdiction of the Slum Rehabilitation Authority under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, the above Application should not be entertained, also cannot be accepted and is rejected.

       Arbitration and Conciliation Act, 1996 - Section 11 Partnership Act, 1932, Section 69 Chief justice or his designate Legal position of. - Chief Justice or his designate who hears an application under Section 11 of Arbitration and Conciliation Act, 1996 is not regarded as a Court and therefore bar under Section 69 of the Partnership Act would not be applicable to this case. It is clear that the Chief Justice or his designate, who hears an application under Section 11, is not a Court. That being so, an application under Section 11 not being made to a Court, the bar under Section 69 of the Partnership Act would not be attracted.

       Partnership Act, 1932 - Section 9 Bar under Section 69(1) and (2) Applicability of. Bar under Section 69 of this Act would extend to any proceeding before a Court and where proceeding is not before a Court, the bar would not be applicable. The bar under Section 69(1) of the Partnership Act stipulates that no suit to enforce a right arising under a contract or conferred by the Partnership Act could be instituted in any Court by a partner against the firm or against other partners unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. The bar under Section 69(2) stipulates that no Suit to enforce a right arising from a contract could be instituted in any Court by a firm against a third party unless the firm is registered, and the persons are shown as the partners in the firm.

       

       The bar under Section 69(3) stipulates that the provisions of sub-sections (1) and (2) would also apply to a claim of set-off or other proceedings to enforce a right arising from a contract. It is therefore clear that the bar under Sections 69(1) and 69(2) has been extended under Section 69(3) to "other proceedings." However, since the bar under Section 69(1) and (2) has been incorporated in Section 69(3), the same shall be applicable to "other proceedings" only if such proceedings are instituted in "a Court". In other words, if the proceedings are not instituted in a Court, then the bar would not apply.