IMPORTANT POINT
The court held that allegations of fraud and misappropriation of funds, when inter se and with no public implications, are arbitrable under the Arbitration and Conciliation Act, 1996.

JUDGMENT :

1. In these set of applications seeking for appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (in short as “the Act’1996”), the parties are same and issues are interconnected and common and, as such, they have been heard and are being decided by this common judgment.

2. The partnership firm M/s. Om Polyplast (Applicant No.1 in Arbitration Petition No.148 of 2019) came into being vide partnership deed dated 01.04.2012, wherein Pradeep Gaurishankar Trivedi (Applicant No.2), Vikas Raj Chhajer( the respondent) and one Mr. Manoj N.Pandya entered into a partnership. On 01.04.2014, Mr. Manoj N. Pandya had retired from partnership vide a retirement deed. The respondents continued with partnership business of M/s. Om Polyplast of manufacturing PVC bags. Later, the respondent, namely Vikas Raj Chhajer intended to retire from partnership firm and, as such, the partnership-cum-retirement deed was executed on 19.03.2018 between the applicant and Vikas Raj Chhajer. It is stated that vide the said deed, a new partnership firm M/s. Sai Polyplast was created by three erstwhile partners, namely, Pradeep Gaurishankar Trivedi (Applicant No.2) and Vikas Raj Chhajer (respondent herein) and Manoj N. Pandya, who again retired from the partnership firm M/s. Sai Polyplast vide retirement deed dated 01.04.2018. The partnership deed dated 01.04.2018 of creation of M/s. Sai Polyplast contains Arbitration Clause in Clause No.23 thereof. M/s. Sai Polyplast continued with the similar business of manufacturing and trading of PVC as that of M/s. Om Polyplast, the erstwhile partnership firm.

3. It is contended in the petition that during the tenure as partner of two partnership firms respondent, namely Vikas Raj Chhajer had entered into mala fide transactions from the funds of the partnership firm and purchased many articles for his personal use for which bills were paid through the accounts of the partnership firm. The respondent was handling and managing the work of the partnership firm as the areas of operation of two partnership firms, namely M/s. Om Polyplast and M/s.Sai Polyplast were different; M/s. Om Polyplast was based at Vapi, whereas M/s. Sai Polyplast was in Surat. It is contended that the respondent had defied the deed and trust of the applicant herein and deliberately defaulted to comply with the responsibility, obligations and duty entrusted as a partner. While retiring from M/s. Om Polyplast and entering in M/s. Sai Polyplast, the respondent had misrepresented on factual aspects. During the audit of the erstwhile firm M/s. Om Polyplast, from which the respondent had retired, it was revealed that huge fraud had been played by the respondent. The notice of termination of respondent as a partner of the firm was given on 16.10.2018. The said notice was not refused by the respondent. In the meantime, forensic audit report of M/s. Om Polyplast for the period from April, 2014 to March, 2018 was submitted on 27.03.2019. It came to the knowledge of the applicant that huge amount of funds of the partnership firms, namely M/s. Om Polyplast and M/s. Sai Polyplast were misappropriated by the respondent and, hence, criminal proceedings on the allegation of cheating and fraud were initiated by the applicant against the respondent and his father-in-law, namely Mr. Mool Chand Jain, who was instrumental in the act of misappropriation. The father-in-law of the respondent, on the other hand, had filed false complaints against the applicant herein.

4. A legal notice dated 30.05.2019 was sent by the respondent with respect to payment of dues, which was replied by the applicant vide letter dated 10.07.2019. In the forensic audit report of M/s. Sai Polyplast for the period from April, 2018 to June, 2018 dated 27.03.2019, the misappropriation of the aforesaid partnership firm was reported.

5. Multiple litigations were instituted by both the parties. Settlement talks were held since July, 2019, however, nothing could be mater