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IN THE HIGH COURT OF KERALA AT ERNAKULAM
N. NAGARESH, J.
REKHA SEBI W/O SEBI PAUL – Petitioner
Versus
ROSALIND JOHN W/O LATE V.P. JOHN – Respondent
A.R. No. 34 of 2022
Decided On : 16-12-2022
Arbitration Request - Partnership Dispute - Arbitration and Conciliation Act, 1994 - Section 4, Section 11(8), Section 12(1) - The court found that the petitioner did not waive her right to arbitration by filing a partition suit in the Civil Court as the pending suit related to family properties and the dispute involved in the Arbitration Request related to issues arising out of a partnership agreement. The court also ruled that the disputes raised in the notice seeking appointment of arbitrator were not vague and that the question of limitation and allegations of inducement and fraud could be considered by the Arbitrator based on the materials available in the Arbitration proceedings.
Fact of the Case:
The petitioner, a party to a partnership deed, sought appointment of an Arbitrator as the respondents had not furnished Financial Statement in respect of the Partnership after 2016 and no share of income was paid to the petitioner. The respondents resisted the Arbitration Request, claiming waiver of the right for arbitration and alleging misappropriation of partnership funds by the petitioner and her husband.
Finding of the Court:
The court found that the petitioner did not waive her right to arbitration by filing a partition suit in the Civil Court, and the disputes raised in the notice seeking appointment of arbitrator were not vague. The court also ruled that the question of limitation and allegations of inducement and fraud could be considered by the Arbitrator based on the materials available in the Arbitration proceedings.
Issues: The issues involved waiver of the right for arbitration, alleged misappropriation of partnership funds, vagueness of disputes raised in the notice seeking appointment of arbitrator, and the question of limitation and allegations of inducement and fraud.
Ratio Decidendi: The pending suit related to family properties and the dispute involved in the Arbitration Request related to issues arising out of a partnership agreement, therefore, the pending suit did not amount to a waiver of the right to resolve partnership disputes through arbitration. The disputes raised in the notice seeking appointment of arbitrator were found to be sufficiently clear, and the question of limitation and allegations of inducement and fraud could be considered by the Arbitrator based on the materials available in the Arbitration proceedings.
Final Decision: The court ordered the appointment of a sole Arbitrator to arbitrate upon the disputes that have arisen between the applicant and the respondent arising out of the partnership agreement, and directed the Registry to communicate a copy of the order to the Arbitrator and obtain a Statement of Disclosure from the Arbitrator. The fees and expenses of the arbitration proceeding were to be decided by the Arbitrator, and all contentions of the parties were left open to be raised before the Arbitrator.
ORDER :
1. Petitioner is a party to Annexure-A1 Partnership Deed. Respondents 1 and 2 are signatories to the Partnership Deed.
2. The petitioner states that the respondents have not furnished Financial Statement in respect of the Partnership after the year 2016. No share of income was paid to the petitioner.
3. The petitioner would state that in view of Annexure-A1 Partnership Deed, the petitioner sought appointment of an Arbitrator as per Annexure-A4 notice, which was issued on 03.01.2022. The respondents have not responded to the notice. Therefore, an Arbitrator may be appointed by this Court under the provisions of the Arbitration and Conciliation Act, 1994.
4. The respondents entered appearance and resisted the Arbitration Request. The respondents submitted that Section 4 of the Arbitration and Conciliation Act, 1994 deals with waiver of the right for arbitration. It is settled law that a party commencing litigation before Civil Court may be deemed to have been refrained from resorting to arbitration agreement. In the present case, the petitioner has filed O.S. No. 999 of 2021 before the Munsiff’s Court, Ernakulam and the same is pending.
5. The respondents would further submit that it is the 1st respondent and her husband, who were running the family business. The petitioner and her husband has misappropriated funds of the partnership.
6. The counsel for the respondents argued that the disputes pointed out in Annexure-A3 notice are vague and hence are not arbitrable. The claim is barred by limitation as the cause of action arose from the year 2016 onwards. There are allegations of inducement and fraud and hence the issues are non-arbitrable. The counsel relied on the judgment of the Hon’ble Apex Court in Booz Allen and Hamilton Inc. (2011) 5 SCC 532. The dispute requires detailed investigations and production of elaborate evidence and hence the issues must be tried by a Court, argued the counsel for the respondents, relying on the judgment of the Apex Court in Radhakrishnan N. vs. M/s. Maestro Engineers and Others, (2010) 1 SCC 72.
7. After considering the pleadings in the Arbitration Request and hearing the arguments raised, this Court finds that there is an agreement of partnership signed by the petitioner and respondents 1 and 2 as evidenced by Annexure-A1. Clause 17 of Annexure-A1 agreement provides that any dispute or difference of opinion between the parties concerning any matter connected with the partnership shall be settled by resort to arbitration. The petitioner has sent Annexure-A3 notice seeking appointment of arbitrator. Annexure-A3 notice has not been responded to by the respondents.
8. The defence of the respondents is that the petitioner has waived her right to resort to arbitration proceedings by filing O.S. No. 999 of 2021 before the Munisiff’s Court, Ernakulam and the same is pending. Therefore, the petitioner should be deemed to have waived her right for resorting to arbitration.
9. The counsel for the petitioner, on the other hand, submits that the Original Suit pending before the Civil Court is purely a suit for partition of family properties. The suit does not have anything to do with the dispute raised by the petitioner, in respect of the Statement of Account and Settlement of Account of the partnership in question.
10. As the pending litigation relates to family properties and the dispute involved in this Arbitration Request relates to issues arising out of a partnership agreement, I find that the pending suit cannot be a bar in resorting to arbitration intended to resolve issues out of partnership agreement. Therefore, filing of O.S. No. 999 of 2021 by the petitioner would not amount to waiver of right to resolve partnership disputes through arbitration.
11. The further defence of the respondents is that the disputes raised in Annexure-A3 notice are vague. A reading of paragraphs 1 to 8 of Annexure-A3 notice would reveal that the petitioner has indicated the disputes with sufficient clarity. As regards the
AI
Filing a partition suit in the Civil Court did not amount to a waiver of the right to resolve partnership disputes through arbitration, and the disputes raised in the notice seeking appointment of ar....
The main legal point established in the judgment is that the bar imposed under Section 69 of the Partnership Act, 1932, does not apply to arbitration proceedings under the Arbitration and Conciliatio....
The main legal point established is that the mere existence of a clause referred to as an ‘Arbitration Clause’ does not necessarily indicate an agreement to refer disputes to arbitration, and an arbi....
The arbitration clause in a partnership deed survives dissolution claims, allowing parties to seek arbitration for unresolved disputes.
The court upheld the validity of an arbitration clause in a partnership deed, allowing for arbitration despite the petitioner resigning.
The presence of an arbitration clause necessitates arbitration for disputes arising among partners, as endorsed by the court.
An unregistered partnership deed does not bar the enforcement of arbitration clauses within it, allowing for dispute resolution under the Arbitration and Conciliation Act.
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