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High Court Of Calcutta
Monoranjan Mallick
SANTIRAM MULLICK - Appellant
Versus
HIRANMOY BAGCHI - Respondent
Matter 998 Of 1989
Decided On : 12/13/1990
ARBITRATION - Setting aside of award - Expulsion of partner - Whether expulsion of partner is contrary to law and beyond the scope of agreement - Whether arbitrators can order expulsion of partner when under the law such expulsion is not permissible because there was no agreement to that effect in the partnership agreement.
Fact of the Case:
The petitioner was expelled from the partnership firm by a majority award of four arbitrators. The petitioner challenged the award on the grounds that the arbitrators had no jurisdiction to expel him, that the majority award was invalid as one of the arbitrators had dissented, and that the expulsion was contrary to law as there was no provision for expulsion in the partnership agreement.
Finding of the Court:
The court held that the arbitrators did have jurisdiction to expel the petitioner, as the partnership agreement provided that disputes between the partners would be referred to arbitration and that the award of the majority of the arbitrators would be final. However, the court also held that the majority award was invalid, as one of the arbitrators had dissented. Finally, the court held that the expulsion of the petitioner was contrary to law, as there was no provision for expulsion in the partnership agreement.
Issues: 1. Whether the arbitrators had jurisdiction to expel the petitioner? 2. Whether the majority award was invalid as one of the arbitrators had dissented? 3. Whether the expulsion of the petitioner was contrary to law as there was no provision for expulsion in the partnership agreement?
Ratio Decidendi: 1. The court held that the arbitrators did have jurisdiction to expel the petitioner, as the partnership agreement provided that disputes between the partners would be referred to arbitration and that the award of the majority of the arbitrators would be final. 2. The court also held that the majority award was invalid, as one of the arbitrators had dissented. 3. Finally, the court held that the expulsion of the petitioner was contrary to law, as there was no provision for expulsion in the partnership agreement.
Final Decision: The petition was allowed in part. That part of the award made on 7th February 1989 expelling the petitioner from the partnership business is set aside and the remaining portion of the award is affirmed.
( 1 ) THIS is an application fort setting aside the Joint majority award of Four Arbitrators dated 6th February 1989 appointed terms of the partnership agreement (clause 13) dated 1. 4. 1987 by which the partnership business of the Chartered Accountancy Firm namely, R and Bagchi was reconstituted and the petitioner and the Respondent nos. to 3 was inducted as partners.
( 2 ) THE petitioner states as follows : without raising any prior dispute and difference whatsoever the respondent no. 1 suddenly by his letter dated 22. 11. 1987 (at page 40 the petition)-appointed his arbitrator being the respondent no. 4 are called upon other partners to appoint their arbitrators in terms of clause 13 of the Deed of Partnership dated 1. 4. 1987. The disputes as referred to by the said notice are in regard to (a) Amount of income of the firm, (b) Diversion of income of the firm, (c) Secretion of the income of the firm, and (d) Withdrawals in excess of the share of the partnership. These were four alleged disputes referred to in arbitration by the said Respondent no. 1. Incidentally, this was the reference on the basis of which the Arbitration proceeding commenced.
( 3 ) IMMEDIATELY by letter dated 11. 12. 1987 (page 41 of the petition) the petitioner replied to the said letter and raised certain issues that prior to invocation of the arbitration agreement and without raising any dispute the said reference is not maintainable inasmuch as there had been no attempt to settle the disputes without which no such reference could be made.
( 4 ) PETITIONER did not receive any of the notice either of appointment or of reference of this arbitration by other partners i. e. respondent nos. 2 and 3. No such letter was given at any point of time. By a letter dated 19-2-1988, the Respondent Nos. 4, 5 and 6 herein served a notice on the petitioner, the Respondent nos. 1, 2 and 3 and an ex-partner Sri S. P. Mukherjee. This was immediately objected to by the petitioner on the ground that this was a reference under clause 13 of the Partnership Deed dated 1. 4. 1987 and as such the said Sri Mukherjee cannot have any such right and/or authority to take part in this arbitration proceedings, he having had already retired.
( 5 ) THEREAFTER, by a letter dated 29. 2. 1988 addressed to Sri P. C. Bhattacharjee, one of the arbitrators, the petitioner raised several points including the point that Sri Mukherjee had already retired and cannot have any right under the new partnership Deed dated 1. 4. 1987 and that Sri Dutta, Respondent no. 31 joined the firm on 1. 4. 1987. It was further pointed out by the petitioner that no specific or clear terms of dispute were made known to the partners and that the disputes raised by the respondent no. 1 were vague, ambiguous, unspecific and not sustainable. It was also stated by the petitioner in the said letter that the petitioner had no knowledge about the appointment of arbitrators by the other partners.
( 6 ) WHILE arbitrators served notice by letter dated 19. 2. 1988 yet first letter from Sri S. K. Dutta, the respondent no. 3 was received on 14. 3. 1988 by which it was alleged that after joining the firm on 1. 4. 1987 the said respondent had come to learn that there are disputes relating to the income of the firm and that the petitioner was receiving money from some clients and that steps may be taken against him.
( 7 ) INCIDENTALLY neither the first reference (at page 40) nor the statement of Sri Dutta (at page 49) speaks of expulsion of any partner. There-after the Respondent no. 2 Sri Roy Chowdhury filed his statement on 14. 3. 1988 without invoking the arbitration agreement or referring the matter to arbitration and this is also after 19. 2. 1988.
( 8 ) IN this purported statement the Respondent no. 2 for the first time alleged as if the petitioner is not fit to remain as partner of the firm but agreed that even if that be so petitioner may be paid for goodwill as per terms of the Partnership Deed. Th
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