Arbitrator is to substitute idea of partners only when there is no clear majority or consensus.

S.R.SINGHARAVELU, J.

This Application was filed under Order 14Rule 8 of O.S. Rules read with Section 8(1) and (2) of Arbitration and Conciliation Act, 1996, praying to dismiss this suit C. S.No. 847 of 2005 as not maintainable and to direct the plaintiffs to invoke the arbitration clause contained in the instrument of partnership dated 1.4.1997 pertaining to the first defendant firm.

2. The respondents/plaintiffs are the sons of one Manjunath Pai whose brothers are the defendants 2 to 4 in the suit. The 5th and 7th defendants are the respective sons of 2nd and 3rd defendants. 6th and 8th defendants are the respective wives of 5th and 7th defendants. Originally Manjunath Pai and his brothers constituted a partnership firm on 1.4.1972 as amended on 1.4.1976 and 1.4.1996. In the year 1996 Manjunath Pai expired and his sons the respondents/plaintiffs were inducted into partnership firm. Since then there was no amicable relationship between the partners, especially with the respondents/plaintiffs. There was a modified partnership dated 1.4.1997. Even though the respondents/plaintiffs contend that they signed the said partnership agreement dated 1.4.1997 without specifically aware, of the contents thereof, it is stated at the end of para 7 of the plaint that the respondents/plaintiffs are proceeding upon the basis that rights of parties are governed by latest amended partnership dated 1.4.1997.

3. Clauses 11 and 14 of the partnership deed dated 1.4.1997 is as follows:

“ 11. The partnership cannot be dissolved either by death or insolvency or for any other reason. In the event of death of any partner, one of the legal heirs of the deceased partner nominated by all the legal heirs of the deceased partner shall be taken in as a partner in the place of the deceased partner. In the event of legal heirs not being able to nominate any such person, the son or daughter or wife or daughter-in-law of the deceased partner shall be admitted as a partner in the place of the deceased partner.

14. In the day-to-day working of the business the decisions of the parties of the first part and second part shall be binding on all the other partners. Any other dispute or differences which may arise between the parties shall be referred to the other partners and the majority decision shall prevail. In the event of there being no clear majority in favour of a decision, the dispute or difference shall be referred to an arbitrator and the decision of the arbitrator shall be final and binding on all partners.”

4. Mr.T.R.Mani, learned senior counsel appearing for the respondents/plaintiffs submitted that mutual consent alone is the fulcrum and basis of a partnership and the latter may exist only so long as the former survives; when once mutuality of mind in terms of the running of the partnership firm goes, and when once the confidence reposed upon either of the partners vanishes, the right of dissolution can automatically come into picture, for being exercised by any one of the partner. In other words, there cannot be a clog of dissolution of a partnership firm. In this connection reliance was placed in a case law Rehmatunnissa Begum v. Price and Others Rehmatunnissa Begum v. Price and Others Rehmatunnissa Begum v. Price and Others AIR 1917 PC 116: 35 MLJ 262, in which the following observation was made:

“A partners claim to a decree for dissolution rests, in its origin, not on contract, but on his inherent right to invoke the Courts protection on equitable grounds, in spite of the terms in which the rights and obligations of the partners may have been regulated and defined by the partnership contract.

It is not, therefore, any contravention of Section 252 (New Section 42) for one of the partners to seek a dissolution or for the Court to decree it under Section 254 (New Section 44) when the partnership is working only at a loss, though the partnership agreement contemplated the continuance of the partnership beyond the date at which the suit was