High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K.P. SIVASUBRAMANIAM
H.G. Oomor Sait and another
Versus
O. Aslam Sait
C.R.P.No.1383 of 2000 and C.M.P.7887 of 2000
Decided On :28-06-2001
Arbitration and Conciliation Act, 1996 - Partnership Dispute - Section 8 - [PARTNERSHIP DISPUTE] - [Arbitration and Conciliation Act, 1996, Section 8] - The court discussed the applicability of the arbitration clause in a partnership dispute and the necessity to refer the dispute to an arbitrator. The court considered the nature of the disputes, serious allegations of fraud, collusion, and misappropriation, involvement of third parties, and the scope of the arbitration clause. The court held that the arbitration clause was not operative after the dissolution of the partnership and that the serious allegations required scrutiny of detailed evidence best left to the civil court. The court also found that the arbitration clause could not apply to the disputes involving third parties and assets of other establishments, and therefore, refused to refer the dispute to the arbitrator.
Fact of the Case:
Partnership dispute arose between the plaintiff and defendants 2 and 3 regarding misappropriation of funds and diversion of business. The plaintiff sought dissolution of the partnership and recovery of amounts due to him. The defendants contended that the suit was not maintainable due to the unregistered nature of the firm and invoked the arbitration clause under Section 8 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court found that the serious allegations of fraud and misappropriation required detailed scrutiny of evidence best left to the civil court. The court also held that the arbitration clause was not operative after the dissolution of the partnership and could not apply to disputes involving third parties and assets of other establishments. Therefore, the court refused to refer the dispute to the arbitrator.
Issues: The issues involved the applicability of the arbitration clause in a partnership dispute, the necessity to refer the dispute to an arbitrator, and the scope of the arbitration clause in relation to serious allegations of fraud and misappropriation.
Ratio Decidendi: The court's decision was based on the finding that the serious allegations required detailed scrutiny of evidence best left to the civil court, the arbitration clause was not operative after the dissolution of the partnership, and could not apply to disputes involving third parties and assets of other establishments.
Final Decision: The Civil Revision Petition was dismissed, and the court refused to refer the dispute to the arbitrator.
1. This revision is directed against the order of the learned subordinate Judge, Ootacamund, in T.A.No.295 of 2000 in O.S.No.243 of 1999. This said application in I.A.No.295 of 2000 was filed by the revision petitioners/defendants 2 and 3 in the suit, under Section 8 of the Arbitration and Conciliation Act, 1996 to direct the dispute raised by the plaintiff to arbitration and refer the parties to such arbitration.
2. Thefacts which are necessary for the disposal of this petition are as follows:
for convenience, the parties are described as plaintiff and defendants. The plaintiffs and defendants 2 and 3 had constituted a partnership (un-registered). While the second defendant is the father, the plaintiff and the third defendant are brothers being the sons of the second defendant. The partnership related to the business which they were running under the name and Style "M/s English Boot House", dealing with foot wears and other allied product. While the father was entitled to a share of 40% of the profit and loss, the other sons were entitled to 30% each.
3. Misunderstandings arose as between the plaintiff on one hand and defendants 2 and 3 on the other. The plaintiff filed a suit in O.S.No.184 of 1999 praying for a direction to defendants to furnish true and proper accounts of the firm M/s English Boot House. The plaintiff alleged that the firm had two show room at Coonoor and two Reduction Sales Centres at Coimbatore. He was looking after the business at one of the show rooms at Coonoor. The second defendant was looking after the other show room at Coonoor and the third defendant was looking after the business at Coimbatore. The entire accounts of the business was looked after by defendants 2 and 3 and having regard to the relationship between the parties, the plaintiff had reposed utmost trust. But later, the plaintiff came to know that defendants 2 and 3 had started a new business of their own in the Head Office itself in the name and style "Foot Fashion" in a clandestine manner. He came across a printed cash bill dated 25.3.1999 bearing No.23325. There was no proper answer when they were questioned. The defendants failed to furnish proper information or statement of accounts for verification. The Auditor with whom the accounts were said to be available also replied very evasively when contacted by the plaintiff. The plaintiff suspected that there was misappropriation of funds from the account of M/s English Boot House. Therefore, according to him, the said suit was filed reserving his right to seek dissolution of the firm and for recovery of the amounts due to him.
4. In the written statement filed by the second defendant while denying the plaint allegations he contented that the suit was hit by Section 69 of the Partnership Act, being an un-registered firm. The firm was subsequently dissolved only on 7.12.1999 after the suit had been filed. The allegations in the suit were vague and the period for which the accounts were sought for was not given in the plaint. The plaintiff was given to wayward life and making unreasonable demands. The plaintiff had no other source of income and only to accommodate him, the firm was constituted in 1982 though the business had been successfully conducted by him from 1948. It was the plaintiff who was trying to make unlawful gains and was of little assistance. He was contributing only nuisance. The third defendant was running his own separate business "Foot Fashion" which was in fact commenced only with the consent of all the partners. But the plaintiff taking advantage of the absence of a written consent, was laying false claim to the said firm. The contention that the plaintiff was not aware of the business earlier, was highly dramatic and artificial considering the location of the business. The accounts of English Book House was being properly and regularly maintained subject to prompt Income-Tax and Sales-Tax assessment. The defendants have not caused any breach of trust or mi
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