The civil court must refer disputes to arbitration as per Section 8 of the Arbitration Act when an arbitration clause exists, focusing on jurisdiction ouster rather than civil jurisdiction retention.

ORDER :

SUNITA AGARWAL, C.J.

1. Heard Mr. Udit N. Vyas, learned advocate appearing for the petitioner and Mr. S.P. Majmudar, learned advocate appearing for the respondents.

2. By means of the present petition invoking the extra ordinary jurisdiction of this Court under Article 227 of the Constitution of India, the petitioner herein, the plaintiff in Commercial Civil Suit No.51 of 2022 seeks to challenge the order dated 25.11.2025, whereby the Commercial Court has allowed the application under Section-8 of the Arbitration and Conciliation Act, 1996, thereby referring the parties to agitate the dispute before the Arbitrator.

3. The Commercial Court categorically records that the deed of retirement of partner from the Partnership, wherein Clause 24 stipulated about the dispute resolution mechanism through arbitration or conciliation, was relied by the learned advocate appearing for the defendant/applicant therein, to move application under Section-8 of the Act, 1996. Having noticed the Clause-24, the Commercial Court has noted that the monetary relief sought by the plaintiff against the defendants are based on services rendered by him as partner to the Partnership Firm, wherein the petitioner was inducted on retirement of other partners. Clause-24 of the deed of induction on retirement of other partners provides for dispute or differences to be settled through the process of arbitration or reconciliation. It is also noted that the plaintiff is the signatory to the said deed.

4. Challenging the order passed by the Commercial Court, it was sought to be argued by the learned counsel for the petitioner herein, referring to Clause-24 of the Partnership Deed dated 22.02.2013 that the said clause pertains to reference of dispute between the continuing partners. As on the date of induction of the petitioner into the Partnership Firm by way of retirement-cum-partnership deed dated 22.02.2013, there were only four partners in the firm, which is a Chartered Accountant Firm. The petitioner had retired on 01.02.2019 by way of a retirement deed and the claims in the suit are pertaining to the share of the petitioner in the profits of the Partnership Firm.

5. The contention is that with the passage of time, as on the date of retirement of the petitioner, i.e. 01.02.2019 there were eight partners, four of them were not signatory to the partnership deed dated 22.02.2013, whereby the petitioner was inducted and as such, the Clause-24 wherein providing for resolution of dispute or differences among the continuing partners by arbitration or conciliation, cannot be invoked.

6. The submission is that the defendant no.1 in the suit is the Partnership Firm which comprised of seven partners as on the date of institution of the suit, with the retirement of the petitioner herein as on 01.02.2019. With the change in the constitution of the Partnership Firm, the claims raised by the petitioner in the suit cannot be said to be pertaining to the dispute or differences between the continuing partners under Clause 24 of the deed dated 22.02.2013.

7. The contention is that the Commercial Court has, thus, committed an error in referring the dispute to arbitration on the application under Section-8 of the Act’ 1996, moved by the Partnership Firm which would include non-signatories to the deed which contains arbitration clause. Reliance is placed by the Apex Court in the case of Hindustan Petroleum Corporation Ltd. Vs. BCL Secure Premises Pvt. Ltd. reported in 2025 SCC OnLine SC 2746.

8. All these arguments made by the learned counsel for the petitioner do not d