Suresh Chand Agarwal & Another vs Mahesh Kumar Agarwal & Another
2012 Latest Caselaw 2599 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Reserved 
 

 
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 75 of 2008
 

 
Petitioner :- Suresh Chand Agarwal & Another
 
Respondent :- Mahesh Kumar Agarwal & Another
 
Petitioner Counsel :- Rahul Sahai
 

 
Hon'ble Pankaj Mithal,J.

Petitioner No.1 and respondent No.1 are both real brothers, being son of late Ram Babu Agarwal. Petitioner No.2 and respondent No.2 are their respective wives.

Petitioner No.1 along with his wife, petitioner No.2 have together applied against respondents No.1 and his wife, respondent No.2 under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") for referring differences between them for settlement to Arbitration in accordance with the arbitration clause contained in the agreement dated 17.4.2004 which in effect is a deed of partnership.

The application for appointment of Arbitrator is being opposed by the respondents on the ground that the aforesaid agreement had outlived its utility and is no longer in existence. The said partnership stands dissolved in view of the Will dated 19.8.2011 alleged to have been executed by the father of petitioner No.1 and respondent No.1 and the two deeds of relinquishment dated 11.5.2008 and, as such, no reference can be made to the arbitrator at this juncture.

Initially, I had heard Sri Anil Sharma, learned counsel for the petitioners on 25.5.2012 but on the request made by Sri B.D.Mandhyan, learned counsel appearing for the respondents, the matter was posted for 28.5.2012 for arguments on behalf of the respondents. On 28.5.2012, Sri B.D. Mandhyan made submissions on behalf of the respondents and the same were supplemented by Sri K.N. Tripathi, Senior Advocate.

The submission of Sri Anil Sharma, learned counsel for the petitioner is that when the partnership deed dated 17.4.2004 is not denied and it is admitted that it contains an arbitration clause, all differences between the parties in relation thereto are referable to arbitration.

On the other hand, the submission of Sri K.N. Tripathi assisted by Sri B.D. Mandhyan is that the aforesaid partnership has come to an end after the differences were settled mutually between the parties and that no request was made by the petitioners for settlement of the disputes or for appointment of arbitrator prior to invoking the arbitration clause.

It appears that initially the family business was being run in partnership by Ram Babu Agarwal with his wife Smt. Sangeeta Agarwal, his elder son Suresh Chandra Agarwal and his wife Smt. Meena Agarwal. On the death of Ram Babu Agarwal, his wife Smt. Sangeeta Agarwal declined to continue as partner; the partnership deed was reconstituted by including the other brother and his wife under the aforesaid partnership deed dated 17.4.2004 w.e.f. 15.11.2004. The said partnership deeds contains the above quoted arbitration clause.

The Will of Ram Babu Agarwal dated 13.8.2001, which is part of the record, is of a date much prior to the date on which the aforesaid partnership deed between the parties was executed and probably for this reason it may not prima facie have any impact upon the aforesaid agreement of partnership.

The submission that the respondents acquired knowledge of the aforesaid Will lately in the year 2008 through their uncle is not acceptable in view of the recital in the relinquishment deeds dated 11.5.2008 which makes a clear reference to the aforesaid Will. The aforesaid relinquishment deeds envisages that the petitioners would have no interest and right in the business of Hotel Mansarover Palace at Mathura whereas respondents would have no right or interest subsisting in the business of the family at Meghalaya, namely, M/s. Babu Ram Agarwal and Brothers. The execution of the aforesaid relinquishment deeds is being denied from the side of the petitioners.

The questions as to whether the aforesaid partnership constituted under the agreement dated 17.4.2004 stood dissolved or seizes to exist or whether the parties have executed the aforesaid relinquishment deeds and the effect thereof as well as whether the differences/disputes arising between the parties in relation to the above partnership deed have already been mutually settled or not are all issues which are required to be decided on the basis of the evidence adduced by the parties. This can be done by the arbitral tribunal in exercise of power under Section 16 of the Act.

The Court at the present moment, while dealing with an application/petition under Section 11(6) of the Act has only limited power to record its satisfaction with regard to the existence of the arbitration agreement between the parties; whether the parties before it are also parties to the agreement; whether the court has territorial jurisdiction; whether the dispute is alive or barred by time; and whether the formalities of invoking arbitration clause has been completed.

This has been settled by the seven Judges Constitution Bench of the Supreme Court in the case of S.B.P. & Co. Vs. Patel Engineering Ltd. and another (2005) 8 SCC 618 where His Lordship Hon'ble Mr. Justice P.K. Balasubramanyan, J. speaking for the majority observed as under:

"It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction or their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the arbitral tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the arbitral tribunal."

His Lordship of the Supreme Court in Anil Kumar Vs. B.S. Neelkanta and others 2010 (2) Arb. LR 482 (SC) held that the Chief Justice or his designate in dealing with an application for appointment of arbitrator has to decide the issues, if raised, regarding:

(i)territorial jurisdiction;

(ii)existence of an arbitration agreement between the parties;

(iii) the claim raised by the party seeking arbitration is dead or alive in the sense it stands duly concluded mutually.

His Lordship further held that disputes between the parties whether claim still subsists or has been extinguished are all within the purview of arbitration and the arbitrator being competent under Section 10 of the Act to rule on its own jurisdiction need not be considered while dealing application under Section 11(b) or (6 )of the Act and appointed the arbitrator.

There is no dispute regarding territorial jurisdiction of this Court.

The pleadings of the parties demonstrates that they are ad idem that the partnership deed dated 17.4.2004 was executed by them and that clause 10 of it contains an arbitration clause to the following effect:

"That all disputes relating to the affairs of the firm between the partners or their representatives, if cannot be settled mutually, shall be referred to arbitration and entire proceedings thereof shall be governed as per provisions of the Arbitration Act."

In view of the arbitration agreement, the disputes and differences arising between the parties are referable to arbitration for resolution provided they are not resolved mutually.

In N. Radhakrishnan Vs. M/s. Maestro Engineers and others 2010 AIR SCW 331 their Lordship of the Supreme Court apart from other controversies were seized with a similar problem regarding the reconstitution of partnership and cessation of earlier partners the Supreme Court held that the controversy whether the firm had been reconstituted and earlier partners have rehired or ceased to be partners squarely fall within the purview of the arbitration clause of the partnership which is said to have been dissolved but refrained from referring the matter to arbitration in view of serious allegations of fraud which were more appropriately considered fit to be examined by the civil court.

Similar is the position here except for the allegation of fraud. Thus, the question as to whether the partnership has actually come to an end and stand dissolved is well within the domain of the arbitration and need not be addressed at this stage in this petition.

The petitioners before making the present application have duly invoked the arbitration clause vide notice dated 15.10.2008 requesting for resolving the dispute amicably or in the alternate to appoint an arbitrator. The aforesaid notice was sent to the respondents by speed post which has not been returned undelivered. Therefore, the presumption of due service by post as provided under Section 27 of the General Clauses Act, would apply as no concrete material has been brought on record to prove that it was not served or that it was not sent to the respondents at their correct addresses.

As far as the dispute arising for settlement through arbitration nothing has been shown to prove that it has become barred by time.

The settlement of the dispute mutually is being denied and so are the deeds of relinquishment which are matters to be considered on the basis of evidence in arbitration.

In view of the above, objections raised on behalf of the respondents are not tenable at this stage and are overruled. At the same time, in the facts and circumstances of the case, I am of the view that it is a fit case where the differences/disputes arising from the partnership agreement dated 17.4.2004 be referred to arbitration for which purpose I appoint Mr. Justice Y.K. Sangal, a retired Judge of this Court, resident of E-301, Vijay Apartments, Ahisa Khand - II, Indirapuram, Ghaziabad, Telephone No.0120-4560570, Mobile No.9415051459 as the sole arbitrator who shall be at liberty to decide about his jurisdiction as provided under the Act.

The learned Arbitrator may make an award in accordance with law at his convenience but expeditiously.

The Registry is directed to communicate this order to the learned arbitrator along with a copy of this order forthwith.

Order Date :- 3.7.2012

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