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2024 Supreme(Online)(KER) 21785
HIGH COURT OF KERALA
C.R. JAIRAJ – Appellant
Versus
SHYNA DEVRAJ – Respondent
OP(C) 777/2024
A court must refer disputes to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 if an arbitration agreement exists, unless there is a clear indication of non-arbitrability.
Headnote:
Arbitration - Partnership Dispute - Arbitration and Conciliation Act, 1996 - Sections 8, 9, 33; Indian Partnership Act, 1932 - Section 33 - This case involved the interpretation of arbitration agreements in partnership disputes, determining the jurisdiction of civil courts when arbitration is invoked.
Fact of the Case:
The petitioner filed to set aside an order that reinstated a former partner expelled from a partnership. The former partner sought an injunction claiming unlawful expulsion, while the petitioner argued for arbitration based on an existing partnership agreement.
Finding of the Court:
The court found that the lower courts did not properly apply Section 8 of the Arbitration and Conciliation Act, which mandates referral to arbitration where an agreement exists. It was also noted that the issues were arbitrable.
Issues: Whether the civil court had jurisdiction to consider the suit despite the existence of an arbitration agreement under the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court upheld that when an arbitration agreement exists, parties should be referred to arbitration unless the court finds no valid agreement. The civil court must assess arbitrability as stipulated under Section 8 of the Act.
Final Decision: The orders of the lower courts were set aside, directing a fresh discussion on the arbitrability of the disputes according to the Arbitration Act.
JUDGMENT
The above original petition is filed seeking to set aside Ext.P1 order dated 14.02.2024 of the Subordinate Judges Court, Cherthala in I. A. No.2/2023 in C.M.A. No.20/2023.
2. The brief facts necessary for the disposal of the original petition are as follows:
The Petitioner is the Managing Partner of M/s.Bharath Agencies and he is the 1st defendant in O.S.No.372 of 2023 pending before the Munsiff Court, Cherthala and the 1st respondent in C.M.A.No.20/2023 on the files of the Subordinate Judge's, Court Cherthala. The 1st respondent herein was a former partner of the firm, who was expelled from the partnership by a unanimous decision of the partners of the firm on 25.08.2023 in accordance with Clause 24 of the Partnership Deed dated 22.08.2023. The 1st respondent herein who is the plaintiff in the suit has filed O.S.No.372/2023 seeking to pass a decree of permanent prohibitory injunction restraining the defendants from illegally expelling her from the partnership firm and also restraining the defendants from dissolving the partnership business prior to the appointment of an Arbitrator by mutual agreement of partners. An application seeking an order of ad- interim injunction pending disposal of the suit was also filed as I.A.No.1 of 2023 along with the suit and the said petition was allowed as per Ext.P4 order granting an ex-parte injunction. Written objections were filed by the petitioner contending that the suit is not maintainable as per the terms of the agreement between the partners in Ext.P2(A) agreement, wherein Clause 25 specifically provides for reference of disputes to arbitration. The learned Munsiff, after considering the written statement and the objections filed by the petitioner and after hearing the parties, by Ext.P7 order, dismissed I.A.No.1/2023. The said order was challenged by the 1st respondent filing CMA No.20/2023 before the Subordinate Judge's Court, Cherthala. Along with the same, an interlocutory application was also filed in which a direction was sought to restrain the petitioner and the respondents 2 to 4 herein from expelling the 1st respondent from partnership, till the disposal of the CMA. The said CMA and the interlocutory application were heard and the appeal and the application were allowed as per Ext.P1 order directing the respondents therein to maintain the status quo by reinstating the status of the petitioner, 1st respondent herein, which existed at the time of institution of the suit and further restraining the respondents from expelling the petitioner till the disposal of the suit. It is aggrieved Ext.P1 order that the present original petition is filed.
3. The learned Senior Counsel appearing for the petitioner would contend that even going by the averments in Ext.P2 plaint and Ext.P2(A) Partnership Deed dated 15.01.2018, relied on by the 1st respondent, the present suit filed as O.S. No. 372 of 2023 is not maintainable, inasmuch as the 1st respondent ought to have availed the remedy of initiating an arbitration proceeding, as per the provisions of the Arbitration and Conciliation Act, 1996 . The learned Senior Counsel specifically refers to paragraphs 12 and 17 and relief No.' i' sought in Ext.P2 plaint and Clause 25 of Ext. P2(A) Partnership Deed produced by the plaintiff in the suit in support of his contention. The learned Senior Counsel for the petitioner specifically refers to Ext.P5 written objection as well as Ext.P6 additional written objection submitted by the petitioner herein/1st respondent in I.A. No.1/2023 in O.S. No.372/2023 and submits that he has specifically contended that the reliefs sought for will not fall under the jurisdiction of the Civil Court and the remedy available to the plaintiff was to file an application under Section 9 of the and on the contrary, she has filed the present suit. In paragraph 7 of the additional written objection, a specific contention was raised to the effect that on a bare reading of the plaint, the existence of an Arbitration Agree
