IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
Prakash Shrivastava, J.
Dr. Papiya Mukherjee - Appellant
Versus
Aruna Banerjea and Another - Respondents
A.P. No. 255 of 2021
Decided On : 30-03-2022
Arbitration - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11 - Section 40 of the Arbitration Act, Section 42, 46, 47, 48 of the Partnership Act, 1932
Fact of the Case:
The applicant filed for the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 to resolve a dispute arising from a partnership deed. The respondent denied the prayer, claiming there was no valid arbitration agreement between the parties.
Finding of the Court:
The court found that the partnership deed contained an arbitration clause, and after the death of one of the partners, the legal representatives are bound by the agreement to the extent provided by law. The court allowed the application and appointed an arbitrator.
Issues: Dispute over the validity of the arbitration agreement, appointment of an arbitrator, and the binding effect of the agreement on legal representatives.
Ratio Decidendi: The court relied on Section 40 of the Arbitration Act, Section 42, 46, 47, 48 of the Partnership Act, and previous judgments to establish the binding effect of the arbitration agreement on legal representatives after the death of a party to the agreement.
Final Decision: The court allowed the application under Section 11 of the Act and appointed an arbitrator to resolve the dispute.
ORDER :
Prakash Shrivastava, J.
This application under Section 11 of the Arbitration and Conciliation Act, 1996 has been filed by the applicant for appointment of arbitrator to resolve dispute between the parties.
2. Plea of the applicant is that she is one of the partners of pathological laboratory namely, Calcutta Clinical Laboratory. The said laboratory is being run by virtue of the original partnership deed which was constituted and re-constituted from time to time. In 1980, fresh partnership deed was executed between Dr. Bonbehari Banerjee, Dr. Dhrubajyoti Banerjea and the applicant. Dr. Bonbehari Banerjee had passed away, therefore, on 20th of May, 1992 Dr. Dhrubajyoti Banerjea and the applicant had entered into a fresh deed of partnership for running the said laboratory business. Dr. Dhrubajyoti Banerjea being of old age had executed the power of attorney in favour of his wife, respondent No.l herein. Dr. Dhrubajyoti Banerjea also passed away on 09th of April, 2015. Further case of the applicant is that in terms of clause 9 of the partnership deed, respondent Nos. 1 and 2 being surviving legal heirs and successors of Dr. Dhrubajyoti Banerjea ought to have been substituted as partners in his place. After the death of Dr. Dhrubajyoti Banerjea, the respondent No. 1 started committing various illegalities in relation to the business of the firm, therefore, the applicant had filed application under Section 9 of the Act being Miscellaneous Case No. 99 of 2016 and restrained order was passed on 16th of March, 2016. Subsequently, the arbitrator was appointed and arbitration proceedings continued for more than 4 years in which both the parties had actively participated and after October, 2016 the applicant was allowed to actively participate in the affairs of the laboratory after giving an undertaking by the respondent before the learned arbitrator. Since, talks of settlement took place, therefore, the arbitration proceedings did not proceed further. Around December, 2019 respondent again started creating trouble, therefore, applicant had served the notice dated 10.06.2020 invoking the arbitration clause and making request to the respondent to appoint the arbitrator. The respondent had denied the prayer by taking the stand that there was no valid arbitration agreement between the parties.
3. Submission of learned Counsel for the applicant is that after the death of Dr. Dhrubajyoti Banerjea, respondents being his legal heirs are bound by the arbitration agreement and that earlier arbitration had already taken place and in fact after dissolution of partnership, subsequently respondent No. 1 was shown as partner and that same objection raised by the respondent in the proceedings under Section 9 of the Act were rejected.
4. Objecting to the prayer for appointment of arbitrator, learned Counsel for the respondents submits that Dr. Dhrubajyoti Banerjea has died and in terms of Sections 46 and 48 of the Partnership Act, applicant has only limited right and that applicant has no right, title and interest in the property and their only right is relating to rendition of account.
5. Having heard the learned Counsel for the parties and on perusal of the record, it is noticed that the partnership deed dated 20th of May, 1992 executed between Dr. Dhrubajyoti Banerjea and the applicant Papiya Mukherjee has not been disputed during the course of argument. This partnership deed contains following arbitration clause:
"10. That in case of differences or disputes between parties cropped up with regard to any matter or thing relating to the partnership affairs and terms and conditions and stipulations shall be referred to arbitrator to be appointed by the one part and the decision of such arbitrator shall be binding on the partners."
6. Dr. Dhrubajyoti Banerjea had died on 09th of April, 2015. Respondents are legal heirs / successors of Dr. Dhrubajyoti Banerjea. Section 40 of the Arbitration Act clearly provides that arbitration agreement will not be disch
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Arbitration agreement – Existence of an arbitration agreement is not affected by death of a party to arbitration agreement.
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.
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.
The court held that an arbitration clause in a partnership deed survives the death of a partner, allowing the arbitration of disputes related to the partnership's operations.
A legal heir of a deceased partner can seek interim relief under the Arbitration & Conciliation Act, 1996 to protect partnership assets, even in the face of claims of dissolution due to the partner's....
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