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2022 Supreme(Bom) 2072

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. Kulkarni, J.
Priya Rishi Bhuta & Anr. – Appellants
Versus
Vardhaman Engineers And Builders & Ors. – Respondents
Arbitration Application No. 149 of 2021 and Commercial Arbitration Petition No. 410 of 2021
Decided On : 06-06-2022

Advocates Appeared:
Mr. Sanjay Jain a/w., Mr. Nishant Sasidharan, Mr. Ashvin Bhalekar, Mr. Ashwin Bhadang, Ms. Shruti Lakhani and Ms. Khushbu Shah i/b. Dipti Shah, for the Appellant; Mr. Mayur Khandeparkar with, Mr. Rajesh A. Revankar i/b. A.G. Revankar & Co, Mr. Ankit Lohia with, Mr. Chetan Yadav and, Mr. Samarth Patel, for the Respondent.

Headnote:

ARBITRATION - SUBJECT - APPOINTMENT OF ARBITRATOR - ACT-SECTION REFERRED - SUMMARY

Fact of the Case:

The applicants, who claim to be the daughters of deceased Amritlal Jain, who was a Partner in the partnership firm - respondent no.1 in each of these applications, are before the Court praying that the disputes and differences between the applicants and the respondents as arising under these partnership deeds be referred to arbitration.

Finding of the Court:

The Court held that the applicants, being legal heirs of their deceased parents, are persons as recognized by the deed of partnership, who are conferred an interest in the partnership firm in the capacity as legal heirs. This is recognized in the three clauses of the Deed of Partnership dated 12 March 2012, firstly, the inherent recognition in the opening paragraph of the partnership deed namely the expression 'person' shall include the legal heirs; secondly, Clause 17 recognizing the entitlement of the legal heirs on the death of the partner to be included into the partnership as a new partner; and thirdly, the arbitration agreement contained in Clause 19 also recognizes the 'heirs'. On a cumulative reading of these clauses, they clearly recognize the rights of the legal heirs also to raise any disputes and differences which may arise under the partnership deed and to refer to such dispute to arbitration.

Issues: Whether the applicants have any arbitral interest to invoke the arbitration agreement as contained in the Deed of Partnership dated 12 March, 2012.

Ratio Decidendi: A party seeking reference of the disputes to arbitration would be required to satisfy that such party is a party to an arbitration agreement and seek reference of the disputes to arbitration. In other words, a person who is absolutely alien and not a party to the arbitration agreement cannot invoke the arbitration agreement.

Final Decision: The Court allowed the arbitration applications and appointed Mr. Justice Naresh H. Patil, Former Chief Justice of Bombay High Court as a sole arbitrator to adjudicate the disputes between the parties.

JUDGMENT

1. These are four applications filed under Section 11 of the Arbitration and Conciliation Act, 1996 (for short, the Act) whereby the applicants, who claim to be the daughters of deceased Amritlal Jain, who was a Partner in the partnership firm - respondent no.1 in each of these applications, are before the Court praying that the disputes and differences between the applicants and the respondents as arising under these partnership deeds be referred to arbitration.

2. The applicants are invoking the arbitration agreement as contained in each of the partnership deed. The facts in relation to all these applications are common, except that respondent no.1-partnership firm in each of these applications is different. Also the arbitration clause as contained in each of the partnership deed(s) is similar. The arbitration agreement as contained in clause 19 reads thus:-

    19. During the continuance of the partnership or at any time afterwards, if any difference arises among the parties hereto or the executors or administrators or their heirs such difference shall be forthwith referred to an arbitrator or arbitrators as appointed by partners. The decision of arbitrator or arbitrators will be final and binding on all the parties hereto and shall be deemed to an arbitration in accordance with and subject to the provisions of the Indian Arbitration Act, 1940 (X of 1940) and Statutory modification or reenactment thereof for the time being in force.

    3. For convenience, the facts pertaining to Arbitration Application No. 149 of 2021 are being referred. Respondent no.1 is the partnership firm of which the applicants claim to have interest as per clause 17 of the Partnership Deed dated 12 March, 2012. Respondent nos.2 and 3 are existing partners. Respondent no.4 has been inducted as a partner after the death of applicants' father Mr. Amritlal Jain. Respondent no.5 is the original partner, who is a signatory to the deed of partnership. Respondent nos. 6 to 10 were inducted as partners within the percentage of respondent no.5's share in the partnership firm and as permitted under the partnership deed. In other words, respondent nos.4, 6, 7 and 10 are not the partners in the original partnership deed, and have been inducted subsequently by the original partners within the share of such original partners and without disturbing such fixed share.

    4. The case of the applicants is that respondent no.1 was originally constituted on 14 November, 1985 in which 20% of the share in the profits and losses of respondent no.1 firm stood in the name of Utsav Amritlal Jain. Respondent no.1 firm was reconstituted from time to time. It is contended by the applicants that Amritlal Jain introduced his parents as well as himself (in the capacity of Karta of a Hindu Undivided Family) as partners in the respondent no.1 firm.

    5. By a Deed of Partnership dated 12 March, 2012 (for short, 2012 Partnership Deed), namely, the partnership in question, respondent no.1 was reconstituted. Some of the salient clauses of the partnership deed recognized the following agreement between the partners:

      (i) The 2012 DOP is binding on the parties thereto as well as on their heirs, executors, administrators and assigns.

      (ii) The partners of Respondent No.1 had agreed to constitute two groups, namely, the Vardhan and the Jain group

      (iii) The Vardhan Group consisted of Respondent No.5, 8 and 9 as well as Kushal Vardhan.

      (iv) The Jain Group consisted of Amritlal, Utsav, Respondent No.2 and Respondent No.3 holding in aggregate 35%.

      (v) Respondents No.4, 6, 7 and 10 were not parties to the 2012 DOP

      (vi) Clause 17 thereof gave the right to the heir of a deceased partner to be inducted as a new partner in place of the latter.

      (vii) Clause 19 is the arbitration clause which could be invoked by a party or his heir. (emphasis supplied)

      6. On 28 October, 2018, the applicant's father Amritlal Jain expired. Immediately two days thereafter i.e. on 30 October, 2018, Utsav Jain, mother of the applicant also expi

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