Bombay High Court
Sanjay Suganchand Kasliwal vs 4] Vijaykumar Ramprasad Jaju on 21 November, 2013
Bench: M.T. Joshi
1 CRA-140-2013
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
CIVIL REVISION APPLICATION NO. 140 OF 2013
Sanjay Suganchand Kasliwal
Age : 43 years, Occu.: Business,
R/o. N-3, CIDCO,
Aurangabad PETITIONER
(Orig. Defendant no.1)
VERSUS
1] Jugalkishor Chhaganlal Tapadia
Age : 60 years, Occu.: Business,
R/o. Nirala Bazar, Samarth Nagar,
Aurangabad
2] Neelam Pankaj Gangwal
Age : 41 years, Occu.: Household
& Business, R/o. 5-5-37/1, Jubli
Park, Aurangabad
Tal. & Dist. Aurangabad
3] Venugopal Omprakash Jaju
Age : 42 years, Occu.: Business,
R/o. 107, Jeera,
Secunderabad (A.P.)
4] Vijaykumar Ramprasad Jaju
Age : 45 years, Occu.: Business,
R/o. 107, Jeera
Secunderabad (A.P.) RESPONDENTS
(No.1-Orig. Plaintiff,
Nos.2 to 4-Orig.
Deft. Nos.2 to 4)
.....
Mr. P.M. Shah, Senior Advocate instructed by and with
Mr. S.P. Shah, advocate for the petitioner.
Mr. P.K. Samdani, Senior Advocate instructed by and with
Mr. R.F. Totala, advocate for respondent No. 1.
Mr. Amol Gandhi, advocate holding for Mr. P.S. Mehta,
::: Downloaded on - 27/11/2013 20:33:50 :::
2 CRA-140-2013
advocate for respondent No.2.
Mr. P.K. Lakhotiya, advocate for respondents No. 3 and 4.
.....
CORAM : M.T. JOSHI, J.
DATE OF RESERVING : 23rd OCTOBER, 2013
DATE OF PRONOUNCING : 21st NOVEMBER, 2013
JUDGMENT :
1. Rule. Rule made returnable forthwith.
With consent of learned counsel for both the
sides, heard finally.
2. Aggrieved by the order dated 15/3/2013
passed by the Joint Civil Judge Senior Division,
Aurangabad in Special Civil Suit no. 257 of
2012, rejecting the application of the present
petitioner/original defendant no.1 for referring
the parties to arbitration under section 8 of the
Arbitration and Conciliation Act, 1986 (for short
"the Act"), the present Civil Revision
Application is filed.
3. For the sake of convenience, the
petitioner herein would be termed as defendant
3 CRA-140-2013
no.1, respondent no.1 would be termed as
plaintiff while respondent nos.2 to 4 would be
termed as defendant nos.2 to 4 as arrayed in the
trial court.
4. Admittedly the composition of the three
partnership firms involved in the present dispute
is as under:
PARTNERSHIP
FIRM
ig EXISTING PARTNERS STATUS IN SUIT SHARES
M/s Kasliwal 1]Jugalkishor Plaintiff 40%
Bhagyoday Chaganlal Tapadia
2]Sanjay Suganchand Defendant No.1 60%
Kasliwal
M/s T.K. Developers 1]Jugalkishor Plaintiff 25%
(Reconstituted) Chaganlal Tapadia
2]Sanjay Suganchand Defendant No.1 42%
Kasliwal
3]Venugopal Defendant No.3 17%
Omprakash Jaju
4]Vijaykumar Defendant No.4 16%
Ramprasad Jaju
M/s Kasliwal 1]Jugalkishor Plaintiff 25%
Tarangan Chaganlal Tapadia
(Reconstituted)
2]Sanjay Suganchand Defendant No.1 65%
Kasliwal
3]Neelam Pankaj Defendant No.2 10%
Gangwal
4 CRA-140-2013
5. The clause regarding the arbitration
agreement in each of the agreements of
partnership firms is as under :
PARTNERSHIP FIRM ARBITRATION CLAUSE
M/s Kasliwal Bhagyoday CLAUSE NO. 18:- If any dispute or
difference arise between the parties
hereto touching the business of the firm
or interpretation of any provision
hereof or otherwise, relating to the
firm and its business the same shall be
referred to three Arbitrators to be
appointed by the consent of both
ig partners and in case of this
disagreement such of the partner shall
appoint one Arbitrator. Both the
Arbitrators will appoint third
Arbitrator and thereupon the majority
decision of arbitration will be final
and the Arbitration shall be governed by
the Arbitration Act 1940.
M/s T.K. Developers CLAUSE NO. 17:- If any dispute or
(Reconstituted) difference arise between the parties
hereto touching the business of the firm
or interpretation of any provision
hereof or otherwise, relating to the
firm and its business the same shall be
referred to three Arbitrators and the
Arbitration shall be governed by the
provisions of Arbitration Act 1940.
M/s Kasliwal Tarangan CLAUSE NO. 17:- If any dispute or
(Reconstituted) difference arise between the parties
hereto touching the business of the firm
or interpretation of any provision
hereof or otherwise, relating to the
firm and its business the same shall be
referred to three Arbitrators to be
appointed by the consent of the all the
partners and in case of this
disagreement each of the partner shall
appoint one Arbitrator and the
Arbitration shall be governed by the
provisions of Arbitration Act 1940.
5 CRA-140-2013
6. Plaintiff and defendant no.1 are known as
builders and developers and have certain projects
which are developed jointly. The dispute in
essence is regarding the suit properties as given
in the schedules and annexed to the plaint.
Pleadings in the plaint :
7. The defendant no.1 being the active
partner of the present partnership firm by
playing fraud, continuously withdrew amount of
Rs.36,14,48,582/- during proceeding three years
from the accounts of those firms and by making
jugglery, rotated amount in other firms and in
his individual account. From the funds, he has
purchased and acquired the properties as detailed
in Schedule "A" in his individual name. Since he
utilized the funds of the above said firms in
law the suit properties are assets of the above
referred firms.
6 CRA-140-2013
It was further pleaded that the present
suit is not related to the dispute in between the
partners of the partnership firm but relates to
the right of the partnership firms as owner and
possessor of the suit properties as the
activities are carried by defendant no.1 with
malafide intention and fraudulently to make
unlawful gains. The issues involved in the
present matter require recording of detailed
evidence which could be done by civil Court only.
. So far as rest of the defendants i.e.
defendant nos.2 to 4 are concerned, it was
submitted that the plaintiff has no claim against
those defendants, however, as all the three firms
are in existence, those defendants would be co-
owner of the property purchased by defendant no.1
in his own name as per their share and therefore
they are added as parties to the present suit.
In the circumstances, declaration
7 CRA-140-2013
regarding all the scheduled properties is sought
that those are the properties of the three
partnership firms and the plaintiff and
defendants are co-owners and joint possessors of
the same.
8. In the circumstances, defendant no.1-
present petitioner appeared in the suit and filed
application under section 8 of the Act. He
submitted that since the claim of the plaintiff
is that all the suit properties are the
properties of 3 partnership firms being acquired
and purchased by defendant no.1 in his individual
name etc., the dispute requires to be referred to
the Arbitrator in view of the above arbitration
clauses.
9. The plaintiff objected the said
application vide his written reply. His
submission in the reply in short are as under:-
8 CRA-140-2013
i) That though the properties are
purchased by defendant no.1 in his
individual name, the funds are not of any
single firm but of three partnership
firms. Further, the plaintiff filed suit
on several causes of action as the
plaintiff and defendant no.1 are common
partners in all the three firms. Further
the firms are not parties to the
proceedings.
ii)
ig That section 8 of the Act
provides that entire subject matter of
the suit should be subject matter of the
arbitration agreement. Such agreement is
not in existence. The plaintiff has
united the causes of action as the
plaintiff and defendant no.1 are common
partners in three firms. In the
circumstances, there cannot be
bifurcation of the subject matter as the
entire subject matter of the suit is not
the subject matter of the agreement.
iii) The matter is of civil nature
related to title. Declaration is sought
under section 14 of the Partnership Act
9 CRA-140-2013
and hence the proceeding is governed by
the civil jurisdiction. The matter does
not relate to the touching the business
of the firm.
iv) Further, as per the provisions
of section 8 (2) of the Act, filing of
the original arbitration agreement or
duly certified copy thereof is
mandatory.
10. The learned Civil Judge Senior Division
upon hearing the parties and referring to the
authorities relied on by them came to the
conclusion as under:-
(i) Though some of the parties are
partners of rest of the firms there is no
arbitration agreement between all the
parties which is the requirement of
section 8 of the Act.
(ii) There is no arbitration agreement
which would govern all the parties and
all the suit properties;
10 CRA-140-2013
(iii) Bifurcation of cause of action or
parties to the suit referring the matter
to the arbitration, cannot be allowed and
(iv)In view of the peculiar nature of the
suit, it is not possible to separate the
cause of action or parties or refer the
matter to the arbitration.
11. During arguments it has become an
admitted fact that preceding the filing of the
suit, lengthy correspondence was made between the
plaintiff and defendant no. 1 . Vide letter dated
2/5/2012, the defendant no.1 has communicated the
plaintiff that sofaras those partnership firms
are concerned (out of which in the present suit
the firm M/s. Kasliwal Tarangan is involved), the
dispute has arisen between the parties. Since
the dispute could not be settled amicably, the
defendant no.1 was invoking the arbitration
clause of respective partnership deeds of each of
the partnership firms. Therefore, he decided to
11 CRA-140-2013
refer the matter to the sole Arbitrator. He
proposed the names of three arbitrators and asked
the plaintiff to accord consent to any one of
them within thirty days from the receipt of the
letter.
12. Plaintiff vide his reply dated 21/5/212
has inter-alia replied that in fact the parties
have earlier approached Chartered Accountant Mr.
Pankaj Agrawal, Mr. Deepak Sawaji, M.L.A. Mr.
Pradeep Jaiswal etc. Even the award in the form
of M.O.U. was prepared by Mr. Gangwal on 6/8/2011
but the defendant no.1 failed to fulfill his
part. In the circumstances, the plaintiff
informed that he had no hesitation to refer the
dispute to the sole Arbitrator suggested by
defendant no.1 subject to the condition that
defendant no.1 would agree to abide by the award
of the Arbitrator in whatever form it may come.
For the purpose, the plaintiff demanded fresh
written agreement to that effect. Thereafter,
12 CRA-140-2013
various letters were shooted between the parties.
13. Thereupon, the defendant no.1 filed six
applications under section 11 of the Act for
appointment of the Arbitrator regarding those
partnership firms referred in the letter as
detailed above. One of the application i.e.
Arbitration Application no. 10 of 2012 was heard
by another learned Single Judge and vide order
dated 3/10/2012, the said Application concerning
the dispute between the present parties regarding
M/s Shree Vinayak Builders and Developers was
allowed. Three of the objections raised by the
present plaintiff were rejected. One of the
objections was that as the allegations of fraud
are involved in the dispute in view of the ratio
of Abdul Kadir Shamsuddin Bubere V/s. Madhav
Prabhakar Oak AIR 1962 S.C. 406, those serious
allegations should be tried in open Court. The
learned Single Judge however rejected all
the objections and appointed Hon'ble Shri
13 CRA-140-2013
Justice A.B. Naik (Retd.) as Arbitrator to
resolve the dispute. Review Application no. 312
of 2012 seeking review of the said order was
dismissed by the learned Single Judge on
25/3/2012. Aggrieved by these decisions, the
plaintiff filed Special Leave to Appeal (Civil)
CC 9088 of 2013 in the Supreme Court of India.
Before the Supreme Court, the parties agreed that
the Arbitral Tribunal be constituted of three
personalities i.e. 1) Justice N.P. Chapalgaonkar
(Retd.), President ; 2) Justice A.B. Naik
(Retd.), Member and 3) Justice M.G. Gaikwad
(Retd.).
14. It is an admitted fact that during the
pendency of the present proceedings, the
defendant no.1 has withdrawn the said dispute.
Mr. P.M. Shah, learned Senior Counsel i/b. Mr.
S.P. Shah for the petitioner submits that for the
bank purposes, defendant no.1 is in dire need of
14 CRA-140-2013
money however during the pendency of the
arbitration proceedings the problem was solved
and hence he withdrew the arbitration.
15. Before me both the sides made elaborate
submissions on each and every aspect of the
controversy as detailed supra. Mr. P.M. Shah
learned Senior Counsel for the petitioner/
defendant no. 1 submitted as under :-
. The common reading of the arbitration
clauses in three agreements of partnership would
show that whatever the dispute between the
partners of the partnership firm may arise, the
same is to be referred either to the single
Arbitrator or the Tribunal consisting of three
personalities. Mere ingenious drafting of a suit
would not make the dispute between the parties
beyond the reach of the arbitration agreements.
The dispute as per the plaint itself is
15 CRA-140-2013
essentially between the plaintiff and defendant
no.1 who are the common partners in all the
partnership firms. The declaration is sought that
the suit properties belong to the partnership
firms. In the circumstances, the dispute cannot
be said to be beyond the arbitration agreement.
Merely because defendant nos.2 to 4 are arrayed
as parties to the suit, it cannot be said that
the parties are strangers to the arbitration
agreement. No bifurcation of cause of action or
parties is needed. The issue as to whether the
suit properties are properties of the three
partnership firms can be decided by the Arbitral
Tribunal. There was no need to file any original
or certified copy of the arbitration agreement in
the admitted facts of the case. In the
circumstances, he submits that the Revision
Application be allowed.
16. On the other hand, Mr. Samdani learned
16 CRA-140-2013
Senior Counsel i/b. Mr. R.F. Totla for the
respondent no.1 submitted as under:-
. That each of the agreement of partnership
firm contains different arbitration clauses.
Subject matter of the suit and subject matter of
the agreement is not same. As per the provisions
of section 8 of the Act there should be a
arbitration agreement of the parties to the suit
and subject matter of the agreement should be
subject matter of the suit. As the parties to
the suit in the present case are not parties to
each and every clause of agreement in separate
partnership agreement and as the subject matter
of the suit is declaration to the title of the
properties of three firms jointly it is not
possible to bifurcate the parties or separate the
cause of action. Further, the pleadings would
show that the defendant no.1 has played a fraud
on the plaintiff. This plea can only be
considered by the civil Court in open. Further,
17 CRA-140-2013
any transfer of any of the suit properties by the
defendant no.1 would not bind the transferor by
the award of the arbitrator. Further the original
or the certified copy of the agreements are not
filed on record. In the circumstances, referring
the authorities which would be discussed later-
on, he submitted that the revision application be
dismissed.
17.
On the basis of this material, following
points arise for my determination.
I) Whether the Civil Revision
Application is liable to be dismissed
for want of original or certified
copy of the arbitration agreement?
II) Whether the arbitration agreement
exists between all the parties to
the suit?
III) Whether the subject matter of the
suit is the subject matter of the
arbitration agreement ?
18 CRA-140-2013
R E A S O N S :
18. As to point no. (I) :-
Though Mr. P.K. Samdani, learned Senior
Counsel for the plaintiff, submits that in view
of the provisions of Section 8 of the Act it is
necessary to file original or certified copy of
the arbitration agreement, it is to be noted that
in the present case, the plaintiff himself has
filed the copies of all the partnership
agreements containing the arbitration agreement.
The same are also filed by the defendant No.1.
Therefore, there is no dispute that the
arbitration agreements exist between the parties
and the specific terminology of the agreements is
before us. In that view of the matter, merely
for non-filing of the original or certified copy
of the agreement, the application could not have
been dismissed by the learned Trial Court. Point
No. (I) is, therefore, answered in the negative.
19 CRA-140-2013
19. As to point no. (II) and (III) :-
The gist of the pleadings, as already
summarized hereinabove, would show that aggrieved
by the alleged misuse of term in the agreement,
the defendant No. 1 has unilaterally withdrawn
the amount from the banks, as detailed in the
pleading and misappropriated the same for the
purposes of acquiring the schedule properties in
his own name. Therefore, the declaration that the
properties are assets of all the three firms with
consequential relief is sought.
Relevant provisions of Section 8 of the
Arbitration and Conciliation Act, 1996
20. Section 8 (1) of the Act runs as under :
"8. Power to refer parties to
arbitration where there is an
arbitration agreement -
(1) A judicial authority before which an
action is brought in a matter which is
the subject of an arbitration agreement
20 CRA-140-2013
shall, if a party so applies not later
than when submitting his first statement
on the substance of the dispute, refer
the parties to arbitration."
21. In view of the above provision, it would
be necessary to examine as to whether the subject
matter of the suit and the subject matter of the
arbitration agreement/agreements is one and the
same and as to whether all the parties to the
suit are the parties to the arbitration
agreement/agreements or not.
Subject matter of the suit :
22. Mr. P.K. Samdani, learned Senior Counsel
for the plaintiff, submits that the suit is not
related to the dispute between the partners of
the partnership firm but relates to the rights of
the firms as owner and possessor of the suit
properties. Further, as the defendant No. 1 had,
with malafide intention and fraudulently,
withdrawn some of the funds of the three
21 CRA-140-2013
partnership firms and invested the same in the
scheduled properties, the issues involved in the
present matter require a detailed inquiry which
could be done only in Civil Court, in view of the
ratio in "Abdul Kadir Shamsuddin Bubere V/s.
Madhav Prabhakar Oak" AIR 1962 S.C. 406 (cited
supra).
23. It is to be noted that the plaintiff
claims that the three of the partnership firms
shall be declared as owner of the scheduled
properties as those are acquired by the defendant
No. 1 from the funds of the partnership firms.
24. A distinction is sought to be made that
as the relief is sought in favour of the
partnership firms that those are the owners of
scheduled properties, it is not a dispute between
the partners of the partnership firms i.e. the
parties to three different arbitration agreements
but regarding the rights of the partnership
22 CRA-140-2013
firms. It was further submitted that since the
cause of action cannot be bifurcated, the parties
cannot be referred to the arbitration.
25. We have already perused the contents of
the relevant clauses in each of the partnership
agreements whereunder the parties have agreed to
refer certain dispute to the arbitration. It
shows that any dispute or difference arising
between the parties touching the business of the
firm or otherwise, relating to the firm and its
business, will have to be referred to the three
arbitrators as per the procedure detailed in each
of the agreements.
26. It is needless to state the established
principle that a partnership firm is not an
independent entity as such in law but is a
convenient name given to a business carried by
the partners. The plaintiff claims that the
scheduled properties acquired by defendant No. 1
23 CRA-140-2013
in his individual name are in fact properties of
the three partnership firms , in the proportion
as detailed supra. This is, in fact, a claim
that the partners of the respective partnership
firms are owners of the scheduled properties in
the proportion as declared in the agreement to
constitute three partnership firms.
27. Besides this, the terms of the agreements
and more particularly "dispute relating to firm
or its business" is wide enough to include the
dispute which is raised in the present suit by
the plaintiff.
28. Mr. P.M. Shah, learned Senior Counsel for
the petitioner, relies on the ratio in "Branch
Manager, magma Leasing and Finance Limited and
another Vs. Potluri Madhavilata and
another" (2009) 10 S.C.C. 103 wherein observation
in "Heyman V. Darwins Ltd." 1942 AC 356 are
relied, which run as under :
24 CRA-140-2013
"..... If, however, the parties are
at one in asserting that they entered
into a binding contract, but a
difference has arisen between them as
to whether there has been a breach by
one side or the other, or as to
whether circumstances have arisen
which have discharged one or both
parties from further performance,
such differences should be regarded
as differences which have arisen `in
respect of,' or `with regard to,' or
`under' the contract, and an
arbitration clause which uses these,
or similar, expressions, should be
construed accordingly. By the law of
England (though not, as I understand,
by the law of Scotland), such an
arbitration clause would also confer
25 CRA-140-2013
authority to assess damages for
breach, even though it does not
confer upon the arbitral body express
power to do so."
In the circumstances, in my view, there is no
need of any bifurcation of any cause of action as
the action brought by the plaintiff is the
subject of all the arbitration agreements.
Parties to the agreement
and parties to the suit
------------------------
29. All the parties to the present suit are
the parties to three different arbitration
agreements contained in three different
agreements to constitute three partnership firms.
While plaintiff and defendant No. 1 are the
partners in M/s Kasliwal Bhagyoday, the plaintiff
and defendants No. 1 and 2 are the partners in
M/s Kasliwal Tarangan - partnership firm. In
26 CRA-140-2013
last of the partnership firm i.e. M/s T.K.
Developers, all the parties to the present suit
except defendant No. 2 are the partners.
30. It is trite to repeat here the history
and purpose behind the enactment of the
Arbitration and Conciliation Act, 1996 in place
of the Arbitration Act, 1940 and other allied
earlier Acts.
31. In order to have a unified legal
framework for the settlement of dispute arising
out of the commercial relations, model laws and
rules were recommended by the General Assembly of
the United Nations, submitted by the United
Nations Commission on International Trade Law
(UNCITRAL). In the result the present unified Act
i.e. the Arbitration and Conciliation Act, 1996
is enacted by the Parliament.
32. The Scheme of the Act would show that
where the arbitration agreement exists between
27 CRA-140-2013
the parties, a judicial intervention shall not be
made unless provided in the Act.
33. In the case of "P.R. Shah, Shares and
Stock Brokers Private Limited Vs. B.H.H.
Securities Private Limited and others" (2012) 1
S.C.C. 594, when two separate sets of arbitration
agreements covering the dispute were existing
between three parties but all the parties to the
dispute were not parties to all the arbitration
agreements, it was held that denial of single
arbitration against some of the parties on the
ground that arbitration agreements exist only
against some of the parties would lead to
multiplicity of proceedings, conflicting
decisions and would cause injustice. Therefore
adjudication of dispute by a single arbitral
tribunal was held proper.
34. In paragraphs No. 19 and 20, the
following observations were made :
28 CRA-140-2013
"19. If A had a claim against B
and C, and there was an arbitration
agreement between A and B but there
was no arbitration agreement between
A and C, it might not be possible to
have a joint arbitration against B
and C. A cannot make a claim against
C in an arbitration against B, on the
ground that the claim was being made
jointly against B and C, as C was not
a party to the arbitration agreement.
But if A had a claim against B and C
and if A had an arbitration agreement
with B and A also had a separate
arbitration agreement with C, there
is no reason why A cannot have a
joint arbitration agreement against B
and C. Obviously, having an
arbitration between A and B and
another arbitration between A and C
in regard to the same claim would
lead to conflicting decisions. In
such a case, to deny the benefit of a
single arbitration against B and C on
the ground that the arbitration
agreements against B and C are
different, would lead to multiplicity
of proceedings, conflicting decisions
and cause injustice. It would be
proper and just to say that when A
has a claim jointly against B and C,
and when there are provisions for
arbitration in respect of both B and
C, there can be a single arbitration.
20. In this case though the
arbitration in respect of a non-
member is under Bye-law 248 and
29 CRA-140-2013
arbitration in respect of the members
is under Bye-law 282, as the Exchange
has permitted a single arbitration
against both, there could be no
impediment for a single arbitration.
It is this principle that has been
applied by the learned Single Judge,
and affirmed by the Division Bench.
As the first respondent had a single
claim against the second respondent
and the appellant and as there was
provision for arbitration in regard
to both of them, and as the Exchange
had permitted a common arbitration,
it is not possible to accept the
contention of the appellant that
there could not be a common
arbitration against the appellant and
the second respondent."
35. Mr. Samdani, learned Senior Counsel for
the plaintiff, however, tried to distinguish the
facts by pointing out that in the case before the
Hon'ble Supreme Court, the arbitration clause was
not in the nature of an adhoc agreement executed
between the parties, but was an institutional
arbitration under the Bye-Laws of the Exchange.
36. Here in the present case, there are three
separate arbitration agreements between the
30 CRA-140-2013
parties to the respective partnership firm. No
stranger is party to the present suit. Further,
the registered address of present three
partnership firms is one and the same i.e.
215/216, First Floor, Building No. 3, Apana
Bazar, Jalna Road, Aurangabad.
37. In view of the above factual situation,
merely because in the case of "P.R. Shah, Shares
and Stock Brokers Private Limited Vs. B.H.H.
Securities Private Limited and others" (cited
supra), the institutional arbitration under the
Bye-Laws of the Stock Exchange was sought to be
enforced, while in the present case there being
arbitration agreements between the parties, it
cannot be said that the ratio in "P.R. Shah,
Shares and Stock Brokers Private Limited Vs.
B.H.H. Securities Private Limited and others"
(cited supra) is not applicable in the present
case.
31 CRA-140-2013
38. The reliance of Mr. P.K. Samdani, learned
Senior Counsel for respondent No.1, on the ratio
in "Sukanya Holdings (P) Ltd Vs. Jayesh H. Pandya
and another" (2003) 5 S.C.C. 531 is misplaced.
In the said case, in a suit for dissolution of
partnership firm alongwith a challenge of the
conveyance deed executed by the partnership firm
in favour of one third party, application under
section 8 of the Arbitration and Conciliation
Act, 1996 was filed. In those circumstances, it
was observed that as the arbitration clause is
not binding on all the parties to the suit, only
some part of the subject matter is covered by the
agreement to refer the matter to the arbitration.
In the circumstances, it was held that as there
is no provision in the Act for bifurcating the
suit in two parts, there cannot be any reference
to the Arbitral Tribunal.
39. In the present case, as already pointed
out, all the parties to the suit are partners in
32 CRA-140-2013
three partnership firms and in between them, the
arbitration agreements exist. The ratio,
therefore, in the facts of the present case, is
not applicable.
. In the result, all the parties to the
suit can be referred to a single Arbitral
Tribunal.
PLEADINGS OF FRAUD :
40. Mr. Samdani, learned Senior Counsel for
the plaintiff further submits that as the
has played a fraud on the plaintiff and rest of
the defendants, by withdrawing some of the funds
of the three partnership firms, the matter
requires to be scrutinized in an open Court and
not in a private chamber by any arbitrator. He
has relied on the ratio of "Abdul Kadir
Shamsuddin Bubere V/s. Madhav Prabhakar Oak" AIR
1962 S.C. 406 (cited supra).
33 CRA-140-2013
41. It is to be, however, noted that the
pleadings would show that by taking undue
advantage of the clause in each of the
partnership agreements, the defendant No. 1 has
unilaterally withdrawn some of the amount and
acquired the scheduled properties in his personal
name. The allegations would amount to
misappropriation. In the circumstances, without
going into the question of effect of enactment of
the Arbitration and Conciliation Act, 1996, on
the ratio of "Abdul Kadir Shamsuddin Bubere V/s.
Madhav Prabhakar Oak" AIR 1962 S.C. 406 (cited
supra), when the Arbitration Act of 1940 was in
force, the argument can not be accepted.
. Similar is the case regarding ratio
relied on by Mr. Samdhani for the plaintiff of
"Booz Allen and Hamilton Inc. V. SBI Home Finance
Limited and others" (2011) 5 S.C.C. 532, wherein
the issue was as to whether the dispute regarding
right in rem though covered by arbitration
34 CRA-140-2013
clause, cannot be referred to the arbitration.
In the present case, no right in rem is in
dispute.
APPLICABILITY OF THE ARBITRATION
AND CONCILIATION ACT, 1996
42. The clauses under which the parties to
the present suit agreed to refer certain disputes
to the arbitration, as detailed supra, refers to
the Arbitration Act, 1940. All the agreements
are admittedly entered into after the enforcement
of the present Arbitration and Conciliation Act,
1996. In the circumstances, the objection was
raised. Consequently, on the strength of the
provisions of Section 85 of the Arbitration and
Conciliation Act, 1996, it was submitted that
existence of the agreement prior to 1996 is a
pre-condition for referring the dispute.
43. It is to be noted that section 85 of the
Act provides that where a dispute is referred for
35 CRA-140-2013
arbitration before the enforcement of the present
Act under the previous Act, then unless otherwise
agreed by the parties, the provisions of the
earlier enactment would apply. However, if the
arbitration proceedings had commenced after the
enforcement of the Arbitration and Conciliation
Act, 1996, the provisions of this Act would apply
to the said arbitration proceedings.
.
It is to be noted that the agreements
between the parties are entered into after 1996.
In the circumstances, the reference to the
earlier Act of 1940 in the agreement is clearly a
mistake. The intention of the parties is to refer
the dispute as stated in the agreement, to the
arbitration and in that view of the matter, mere
reference to the earlier Act in the agreement
would not make any difference for referring the
dispute between the parties as per the provisions
of the present Arbitration and Conciliation Act,
1996.
36 CRA-140-2013
Protection of the properties :
44. The apprehension of the plaintiff that
the arbitral tribunal would not be able to reach
a stranger in case the defendant no. 1 creates
any third party interest needs no consideration
as the provisions of Section 9 of The Act
provides right to seek interim measures from the
court in this regard.
45. Much arguments were advanced on behalf of
both the sides on the question as to whether the
power to appoint arbitrator either under section
8 or section 11 of the Act, is administrative in
nature or a judicial one, thereby affecting the
provisions of section 16 of the Act where under
the arbitrator can even rule on its own
jurisdiction. The ratio of the case of S.B.P. &
Co. V. Patel Engineering Ltd." 2005 (8) S.C.C.
618, was also pressed into service by the
plaintiff. However, since we have come to the
37 CRA-140-2013
conclusion that the Arbitral Tribunal to be
appointed would have the jurisdiction to decide
the dispute in the present suit, there is no need
to advert to ratio of the case relied on by the
learned Senior Counsel.
CONCLUSIONS :
46. The plaintiff himself prior to the filing
of the present suit, has agreed for referring the
dispute between the parties to the arbitration as
regards one of the partnership firms involved in
the present dispute i.e. M/s Kasliwal Tarangan,
though put certain conditions before referring
the dispute. As regards the dispute between the
parties regarding one another firm, namely, M/s
Shri Vinayak Builders and Developers, though the
present plaintiff opposed application under
section 11 of the Act in this Court, ultimately
agreed before the Supreme Court for appointment
of Arbitral Tribunal. There is no difference in
38 CRA-140-2013
the present action and the subject matter of the
arbitration agreement. Difference between the
parties to the agreements and parties to the suit
is not crucial as all the parties are the
partners of the partnership firms in whose favour
relief is sought, being governed by three
arbitration agreements. In the circumstances, no
bifurcation of cause of action or separation of
parties is needed in the present matter.
47. Resultantly, the order of the learned
trial court is set aside. Instead, the revision
application is allowed with costs and the
application filed by the present petitioner/
original defendant No. 1 in Special Civil Suit
No. 257/2012 is allowed. The parties in the suit
are referred to arbitration. The arbitral
tribunal shall consist of :-
1. Justice Shri. N.P. Chapalgaonkar (Retd.),
Chairman
39 CRA-140-2013
2. Justice A.B. Naik (Retd.),
Member
3. Justice M.G. Gaikwad (Retd.),
Member
to which the parties have agreed in Supreme Court
of India in a different dispute.
The Tribunal to enter upon the reference,
as expeditiously as possible, on remuneration and
other terms and conditions, to be fixed by the
Tribunal in consultation with parties. Rule made
absolute accordingly.
[ M. T. JOSHI ]
JUDGE
npj/CRA-140-2013
