IN THE HIGH COURT OF JUDICATURE AT PATNA
Sanjay Karol, J.
Rukmini Devi & Ors. - Appellant
Versus
M/s Aryan Flavors (registered Partnership Firm) Rajpati Bhawan & Ors. - Respondent
Request Case No. 69 of 2019
Decided On : 04-09-2021
Arbitration and Conciliation Act, 1996 – Section 11 – Partnership Act, 1932 – Section 43 – Appointment of Arbitrator – Disputes arising out of management and affairs of partnership firm which already stood dissolved – Partners having resigned from partnership firm, it would not take away their rights for adjudication of disputes arising out of partnership, more so, for prior to such resignation, disputes inter se partners with respect to management and affairs of firm had already arisen, with partners notified seeking invocation of arbitration clause – Where there is a clause in articles of partnership or agreement or order referring all matters in difference between partners to arbitration, Arbitrator would have power to decide whether or not partnership will be dissolved and award its dissolution – There is a written agreement containing arbitration clause and existence of disputes – Dispute is required to be referred to arbitration of Arbitrator to be appointed by this Court – A retired Judge of Patna High Court appointed as Arbitrator. (Paras 10, 11, 16, 17 and 18)
JUDGMENT
1. Petitioner No. 1 Rukmini Devi has since expired. It is stated at the Bar that her legal heirs, namely petitioner no.2 Ratna Devi; petitioner no.3 Pushpa Devi, petitioner no.4 Amit Kumar and petitioner no.5 Pritam Kumar, are already on record and the right to sue survives upon the remaining petitioners. Registry to make necessary correction in the memo of parties.
2. The instant petition stands filed under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator for adjudication of the disputes inter se the parties.
3. Parties entered into an agreement to constitute a firm vide Partnership Deed dated 01.07.2016 by the name M/s Aryan Flavours. Clause 15 thereof, provides a mechanism for resolution of the disputes through arbitration.
4. Petitioner No. 1 Rukmini Devi vide communication dated 23rd April, 2018 (Annexure P-2) raised certain disputes pertaining to the affairs of the partnership firm. Thereafter certain correspondences were exchanged between the parties in which allegations were made, as also claim and counter claims set up.
5. On 18th of October, 2018 (Annexure P-5), petitioner no.1 Rukmini Devi pressed for settlement of her accounts and on failure thereof, expressed her intent of having the firm dissolved and assets distributed. The same was not done.
6. Vide legal notice dated 22nd April, 2019, petitioners called upon the respondents to dissolve the partnership firm within a period of one month, failing which clause 15 of the partnership deed dated 01.07.2016 (Annexure-1) be invoked.
7. Thus, the parties were put to notice both with regard to the existence of the dispute; nature thereof; the issues for consideration; and their intent of invoking the arbitration clause.
8. Sri J. S. Arora, learned senior counsel appearing for the respondents opposing the petition has made the following submissions:-
(a) Petitioner No. 1 Rukmini Devi has since expired.
(b) Petitioner nos.3 and 5, namely Pushpa Devi and Pritam Kumar, respectively, have voluntarily resigned from their firm on 27.11.2018 and as such are not liable to invoke clause 15 of the Partnership deed.
(c) The notice issued by the petitioners was for dissolution of the firm and settlement of the accounts which can only be done under and in terms of Sections 44 and 48 of the Indian Partnership Act, 1932.
9. Insofar as death of petitioner no.1 Rukmini Devi is concerned, the issue needs no further deliberation for the right to sue devolves upon the remaining petitioners and as the Court is informed there being no other heirs claiming right in here state.
10. Insofar as the partners, namely petitioner no.3 and 5 namely Pushpa Devi and Pritam Kumar, respectively, having resigned from the partnership firm is concerned, it would not take away their rights for adjudication of disputes arising out of partnership, more so, for prior to such resignation, disputes inter se the partners with respect to the management and affairs of the firm had already arisen, with the partners notified seeking invocation of the arbitration clause.
11. Coming to the next contention, the instant petition is not for a dissolution of the partnership firm, but adjudication of the disputes arising out of the management and affairs of the partnership firm, which, in fact, already stood dissolved by virtue of Section 43 of the Partnership Act, 1932 considering the nature of the partnership which was "at will", in relation to which the petitioners had already served a legal notice.
12. In fact, the issue is no longer res integra for the Apex Court in V.H. Patel & Company and others Versus Hirubhai Himabhai Patel and others, (2000) 4 SCC 368, has clearly held that where there is a clause in the articles of partnership or agreement or order referring all the matters in difference between the partners to arbitration, the Arbitrator would have power to decide whether or not the partnership will be dissolved and award its dissolution. For the principles laid down still hol
Banarasi Das v. Kanshi Ram, AIR 1963 SC 1165; Joginder Pal v. Pushpinder Kumar
Mayavati Trading Private Limited Versus Pradyuat Deb Burman
V.H. Patel & Company and others Versus Hirubhai Himabhai Patel and others
The main legal point established in the judgment is that the dispute amongst the partners regarding the dealings of the firm could be referred to arbitration as per the partnership deed, but once the....
The arbitration clause survives the dissolution of a partnership firm and can be invoked by any partner, including legal representatives, to resolve disputes.
Legal heirs of a deceased partner are bound by the arbitration clause in the partnership deed, allowing disputes to be referred to arbitration despite the death of a partner.
Dissolution of partnership - Non-compliance of Clause 18 of Partnership Deed - Absence of any embargo to refer post dissolution dispute to Arbitrator, it is not possible to accept that Arbitration cl....
Partnership dissolution and limitation period for arbitration claims.
The arbitration agreement survives the death of a partner, and legal representatives of the deceased are entitled to enforce the agreement and participate in arbitration proceedings.
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