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IN THE HIGH COURT OF GAUHATI, ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH
ROBIN PHUKAN, J.
Rampat Lal Verma, S/o. Late Sahindar Prasad Verma - Appellant
Versus
Rahul Verma, S/o. Late Sampat Lal Verma & Ors. - Respondents
Arb.A.No.6 of 2024
Decided On : 22-10-2024
(A) Arbitration and Conciliation Act, 1996 - Section 8 - Indian Partnership Act, 1932 - Section 42 - Appeal against dismissal of petition for arbitration - The trial court dismissed the petition under Section 8, citing automatic dissolution of the partnership upon death of a partner - The court found that the partnership deed contained an arbitration clause and that the legal heirs are bound by its terms - The court held that the trial court erred in not referring the matter to arbitration as per the arbitration clause in the partnership deed. (Paras 8, 18, 27)
(B) Legal heirs and arbitration - The court ruled that legal representatives of a deceased partner are bound by the arbitration clause in the partnership deed, allowing them to invoke arbitration for disputes arising from the partnership. (Paras 22, 26)
Facts of the case:
The appeal arises from a dismissal of a petition to refer a commercial suit to arbitration, where the appellant contended that the partnership deed included an arbitration clause, and the trial court erroneously ruled that the partnership was automatically dissolved upon the death of a partner. (Paras 4, 5)
Findings of Court:
The court found that the trial court's dismissal of the petition was unjustified and that the matter should be referred to arbitration as per the partnership deed. (Paras 27, 28)
Issues: Whether the trial court was justified in dismissing the petition under Section 8 of the Arbitration and Conciliation Act given the existence of an arbitration clause in the partnership deed. (Para 8)
Ratio Decidendi: The court emphasized that the existence of an arbitration clause mandates referral to arbitration, and the legal heirs are bound by the terms of the partnership deed. (Paras 22, 27)
Result: The appeal is allowed, and the trial court's order is set aside, directing referral to arbitration.
JUDGMENT :
Robin Phukan, J.
Heard Mr. P.J. Saikia, learned Senior Counsel, assisted by Mr. A.K. Gupta, learned counsel for the appellant and Mr. S. Dutta, learned Senior counsel, assisted by Ms. S. Mochahari, learned counsel for the respondents.
2. This appeal, under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996, is directed against the order dated 09.08.2024, passed by the learned Civil Judge (Senior Division), Dibrugarh, in Misc. (J) Case No. 206/2024, arising out of Commercial Suit No. 02/2024.
3. It is to be noted here that vide impugned order dated 09.08.2024, the learned Civil Judge (Senior Division), Dibrugarh (‘trial Court’, for short) had dismissed the Petition No. 3608/2024, filed by the appellant/defendant No. 1, under Section 8 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’, for short), praying for dismissal of the analogous Commercial Suit by referring the parties to go for arbitration, under Section 8 of the Act of 1996.
4. The background facts, leading to filing of the present appeal, are briefly stated as under :
“The respondents Nos. 1 to 4 herein as plaintiffs have instituted a Commercial Suit No. 02/2024, against the present appellant and proforma respondents. The claim of the respondents of the aforesaid Commercial Suit is that they are legal heirs and representatives of Late Sampat Lal Verma and that there was a partnership firm in the name and style of M/s Verma Market, which came into existence on 01.04.1984 and thereafter, continued vide deed of partnership, dated 01.04.1992, as per terms and conditions incorporated in the said partnership deed, and that the appellant, along with Lalmati Devi Verma and Sampat Lal Verma, were the partners of the said partnership firm having 1/3rd share each in the said partnership firm and the said firm constructed multi storey RCC buildings on different plots and also own different businesses including Hotel Maurya, and that one of the partners, namely, Lalmati Devi Verma expired on 24.12.2022, and after the death of Lalmati Devi Verma, the partnership firm continued with two partners viz. the appellant and Sampat Lal Verma and since the legal heirs of Lalmati Devi Verma were not interested to take any share in the partnership firm, they relinquished their share in favour of the two continuing partners. Thereafter, Sampat Lal Verma expired on 21.11.2023 and on the demise of Sampat Lal Verma, the partnership firm stands dissolved automatically on 21.11.2023, as one of the two remaining partners expired and that the plaintiffs being the legal heirs of deceased partner, namely, Sampat Lal Verma, were not interested in continuing the firm or constitute a fresh partnership firm and as such, on 26.01.2024, the plaintiff No. 1 requested the appellant to render the accounts of the firm and disburse half share of the surplus and property of the partnership firm, but the appellant refused to do the same. It is also stated that even after dissolution of the firm, the appellant willfully and persistently committed breach relating to the affairs of the dissolved partnership firm and also utilized the money of the partnership firm for his personal use and that the appellant is also planning to grab the entire share and property of the partnership firm by manipulating the accounts of the firm and that the aforesaid illegal acts of the appellant casted a cloud of doubt in the mind of the plaintiffs about their half share in the property/surplus of the dissolved partnership firm and therefore, prayed for a decree of declaration that the partnership firm, namely, M/s Verma Market had already been dissolved on the death of Sampat Lal Verma or alternatively a decree for dissolution of the partnership firm and for declaration that the plaintiffs are entitled to half share of the surplus and proceed of the assets and properties of the firm after meeting the liabilities of the firm and for disbursal of the half share of partnership firm and for appointment of receiver
AI
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 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....
Dissolution of partnership - Non-compliance of Clause 18 of Partnership Deed - Absence of any embargo to refer post dissolution dispute to Arbitrator, it is not possible to accept that Arbitration cl....
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.
Arbitration agreement – Existence of an arbitration agreement is not affected by death of a party to arbitration agreement.
Point of law: Arbitration - Arbitral Award - Interference by Court - Scope of powers of Appellate Court under Section 37 of Arbitration Act are more limited than limited powers of the Court hearing t....
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