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IN THE HIGH COURT OF CALCUTTA
Shekhar B. Saraf, J.
Manika Sett - Appellant
Versus
Sett Iron Foundry And Others - Respondent
A.P No. 80 of 2020
Decided On : 28-07-2022
Arbitration - Partnership Dispute - Arbitration and Conciliation Act 1996, Section 11(6) - 18, 21, 7(1) - The court examined the validity of the arbitration agreement in the partnership deed and held that the parties must be referred to an arbitrator to decide the disputes between them, including questions of jurisdiction and non-arbitrability. The appointment of a sole arbitrator was allowed, and the parties were directed to adhere to the arbitration agreement.
Fact of the Case:
The petitioner, a partner in an unregistered partnership firm, sought appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act 1996 to adjudicate disputes with the respondents. The respondents denied the existence of any dispute and opposed arbitration, arguing that the arbitration clause in the partnership deed was not mandatory.
Finding of the Court:
The court found that there existed a valid arbitration agreement between the parties, and the parties must be referred to an arbitrator to decide the disputes, including questions of jurisdiction and non-arbitrability. The appointment of a sole arbitrator was allowed, and the parties were directed to adhere to the arbitration agreement.
Issues: Validity of the arbitration agreement in the partnership deed, existence of a dispute, and the requirement for arbitration under the partnership agreement.
Ratio Decidendi: The court emphasized the need for an unequivocal and unambiguous consent by the parties to arbitrate, and held that the intention of the parties to have their disputes arbitrated is paramount, even where the dispute resolution clauses are vaguely worded or ambiguous. The court also applied the prima facie test to determine the existence and validity of the arbitration agreement.
Final Decision: The court allowed the appointment of a sole arbitrator and directed the parties to adhere to the arbitration agreement. The appointment was subject to the submission of a declaration by the arbitrator in accordance with the Act.
JUDGMENT
Shekhar B. Saraf, J. - The petitioner Smt. Manika Sett has filed this arbitration application under Section 11(6) of the Arbitration and Conciliation Act 1996 seeking appointment of an arbitrator by this Court for adjudication of disputes with the respondents.
Facts
2. The respondent no. 1 is an unregistered partnership firm, having its principal place of business at 8/1 'Q' Road, Mansatala, P.O. Dasnagar, Howrah - 711105 and carrying on business of moulding unit and several other manufacturing activities. The petitioner is one of the partners of the said partnership firm.
3. The said partnership firm was originally constituted with three female members of the 'Sett family' namely the petitioner herein, the respondent no. 2 and one Smt Ujjala Sett (since deceased). Over the course of subsequent years, the respondents no. 3, 4 and 5 were inducted into the said partnership firm as partners. Accordingly, a partnership deed dated April 1, 2006 was executed between the parties recording the terms and conditions, and superseding the earlier partnership deed dated April 1, 2003.
4. The petitioner alleges to have been kept in dark as regard the business run in the name of the partnership firm and unlawfully deprived of her share in the net profits earned by the firm. The petitioner further alleges that she was denied access to the books as well as the annual Balance Sheet and Profit & Loss Account of the said business.
5. Subsequently, the petitioner communicated its intent to retire from the said partnership business with all her legitimate dues, and called upon the respondents to handover the copies of books of accounts.
6. Be that as it may, the petitioner issued an arbitration notice dated July 25, 2019 under Section 21 of the said Act seeking to settle the disputes between the parties by way of arbitration in terms of Clause 18 of the Partnership Deed dated April 1, 2006, and thereby appointed a Sole Arbitrator for adjudication of such disputes.
7. The respondents failed to turn up to either accept the nomination of the Sole Arbitrator, or to suggest any other person to act as an Arbitrator. The respondent no. 1 issued a reply dated August 1, 2019 denying the existence of any dispute and negating the request of the petitioner to refer the alleged dispute to arbitration by saying that the said Clause in the partnership deed has been erroneously interpreted by the petitioner to mean arbitration under the said Act.
8. This application seeks the intervention of the Court to appoint an arbitrator for adjudication of disputes between the parties.
Submissions
9. Counsel appearing on behalf of the petitioner has made the following arguments:
a. The counsel states that the position taken by the respondents denying the existence of any dispute and the consequent referral to arbitration without the existence of dispute in the first place is incorrect and that the same should be rejected. The counsel places the decision of the Supreme Court in Deutsche Post Bank Home Finance Ltd. -v- Taduri Sridhar reported in (2011) 11 SCC 375 in its favour and contends that a dispute can be said to arise when one party makes certain claims and other party refuses or denies the same. The relevant portion has been reproduced below - 18. The existence of an arbitration agreement between the parties to the petition under section 11 of the Act and existence of dispute/s to be referred to arbitration are conditions precedent for appointing an Arbitrator under section 11 of the Act. A dispute can be said to arise only when one party to the arbitration agreement makes or asserts a claim/demand against the other party to the arbitration agreement and the other party refuses/denies such claim or demand.....'
b. The counsel submits that an arbitration agreement is not required to be any particular form, and that the clause should communicate the intention of the parties to arbitrate the disputes and differences. The counsel has placed Y.L. eServices Pvt. Ltd. -v- Silver
The main legal point established in the judgment is the requirement for an unequivocal and unambiguous consent by the parties to arbitrate, and the application of the prima facie test to determine th....
An arbitration agreement must exhibit clear mutual intent from the parties; ambiguity or permissiveness in wording negates enforceability under the law.
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.
The main legal point established is the court's authority to appoint an Arbitrator when an Arbitration Agreement is invoked, and the need for detailed examination of the effect of new agreements on t....
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....
Court clarified that initial appointment of an Arbitrator must derive authority from the Arbitration Act, rejecting jurisdiction under Section 8 and confirming that participation does not waive juris....
The referral court's scope under Section 11(6-A) is limited to the prima facie existence of an arbitration agreement. A formal notice under Section 21 is not mandatory if the respondent has prior kno....
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