Partnership disputes concerning fiduciary responsibilities and operations are arbitrable under the Arbitration and Conciliation Act, 1996, ensuring parties access to fair dispute resolution.

JUDGMENT (Oral)

(video-conferencing)

C. Hari Shankar, J.

ARB.P. 340/2021

1. Mr. Akhil Sibal, learned Senior Counsel for the respondent, submits that he has no objection to the disputes in this petition being referred to arbitration.

2. The stakes are stated to be in the area of around Rs.14 crores to Rs.15 crores, though Mr. Ashish Dholakia, learned Senior Counsel for the petitioners, submits that they may be higher.

3. The facts stated in the petition, giving rise to the disputes between the parties, are thus set out in paras 1 to 16 of the petition:

"1. That the firm under the name and style of M/s Alnoor Exports, i.e. was originally constituted between two partners namely, Mr. Sunil Sud [Petitioner No. 1] and Mr. Ajay Sud under the deed of partnership dated 22.09.1992 [hereinafter referred to as "the Partnership Firm"]. The Partnership Firm, having its registered and principal office in New Delhi, was set up to, inter alia, carry on the business of manufacturing, processing, preserving, exporting and trading in frozen meat, food, eggs and vegetables for human and animal consumption.

2. That during the course of the business of the Partnership Firm, the following immovable assets have been purchased by the Partnership Firm:

a) Land at Jansath Road, Muzaffarnagar admeasuring 5683.96 square meters [herein after referred to as "the Factory"].

b) Flat No. 505, Sun View Apartment, Saket, Meerut.

c) Office at J-603, Jasola, New Delhi admeasuring 98.128 square metres.

3. That it is relevant to mention that while the Petitioner No. 1 was actively involved in the businesses of the family including in the Partnership Firm and was largely responsible for the exponential growth and success of the businesses, the Petitioner No. 1 was diagnosed with Motor Neuron Disease [MND] in the year 2013.

4. That in view of the ill-health of the Petitioner No. 1 and his inability to participate in the Partnership Firm, it was mutually decided between the Petitioner No. 1 and the Respondent to induct Petitioner No. 2, who is the daughter of the Petitioner No. 1 as a partner in the Partnership Firm. Accordingly, the Petitioner No. 2 was inducted as a partner with effect from 06.08.2013 and the partnership was reconstituted between the Petitioners and the Respondent without dissolving the Partnership Firm.

5. That under the Reconstituted Deed of Partnership, it was, inter alia, agreed that after providing for all expenses incidental to the business, the net yearly profit/loss of the business will be allocated between the partners as follows:

i) Mr. Sunil Sud [Petitioner No. 1]: 37.50%

ii) Ms. Priya Sud [Petitioner No.2]: 12.50%

iii) Mr Ajay Sud [Respondent]: 50%

The Petitioners and the Respondent are therefore, equal partners in the Partnership Firm.

6. That however, taking undue advantage of the ill-health of the Petitioner No. 1, the Respondent has been conducting the business of the Partnership Firm to the exclusion and detriment of the Petitioners. In view of the dishonest manner in which the business of the Partnership Firm was being conducted by the Respondent, the Petitioner No. 1, in and around July 2020, confronted the Respondent. The Petitioner No. 1 raised objections not only with respect to the completely non-transparent manner of functioning by the Respondent in respect of the Partnership Firm but also objected to the wholly unjustifiable and excessive expenditures made by the Respondent without the consent or knowledge of the Petitioners.

7. That instead of addressing the concerns raised by the Petitioner No. 1 and carrying out the affairs of the Partnership Firm in a just and fair manner, the Respondent, along with his sons, further restricted the access of the Petitioners to the business operations of the Partnership Firm. In furtherance of their dishonest intentions of excluding the Petitioners, the Respondent carried out a complete overhaul of the staff, including the accounting team, who had been in the employment of the Partner