Bombay High Court

Darshan Mahendra Nibjya vs Jayantilal Tarachand Oswal on 24 February, 2025

2025:BHC-AS:9406


                                                                                           17-ARBP-53-2025 copy.docx



                                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                CIVIL APPELLATE JURISDICTION
         Digitally
         signed by
         SHRADDHA
SHRADDHA KAMLESH
         TALEKAR
                                           ARBITRATION PETITION NO. 53 OF 2025
KAMLESH
TALEKAR  Date:
         2025.02.27
         17:49:40
         +0530

                      DARSHAN MAHENDRA NIBJYA                                              ....Petitioner

                      Versus

                      JAYANTILAL TARACHAND OSWAL & Ors.                                   ....Respondents



                      Mr. Sanket Bora a/w. Vidhi Punmiya, Amiya R. Das, and Unnatii
                      Thakkar i/b SPCM Legal, for Petitioner.

                      Mr. Dhruva Gandhi i/b Ms. Prakruti Joshi, for Respondent No. 2.



                                                          CORAM : SOMASEKHAR SUNDARESAN, J.

                                                          Date    : February 24, 2025

                      Oral Judgement:

1. This is a Petition under Section 11 of the Arbitration and Conciliation

Act, 1996 ("the Act"), which has been filed in rather piquant circumstances.

2. By an order dated August 7, 2023, in view of the two arbitrators

nominated by the Petitioner and Respondent No.1 not being able to agree

upon a presiding arbitrator, a Learned Single Judge of this Court was pleased

to appoint a Retired Judge of this Court as a presiding arbitrator. The order

passed under Section 11 of the Act was challenged by Respondent No. 1

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before the Supreme Court, which eventually, by an order dated April 8, 2024,

dismissed the challenge stating that there was no reason to interfere, since

eminently, the arbitration agreement had been appropriately considered by

the Learned Single Judge.

3. Respondent No. 2 is now a partner of the firm, in which the Petitioner

was once upon a time, a partner. In fact, the disputes and differences between

the parties centre around the exit of the Petitioner from the same firm. Two

partnership deeds, identical in their terms, varying only in date form part of

the record. The arbitral tribunal is seized of all these proceedings. It is a

matter of record that Respondent No. 2 has taken out an application under

Section 16 of the Act, stating that at the same time as when the Petitioner was

a partner of the firm, Respondent No. 2 was not a partner of that firm, and

that consequently, there has been no forwarding of the baton of the

arbitration agreement, linking the Petitioner to Respondent No. 2 under the

arbitration agreement.

4. Consequently, he would submit that he would be entitled to raise this

issue during the course of these proceedings too, and object to appointment

of the substitute presiding arbitrator, for which this application has been

taken out. The presiding arbitrator who was appointed by a Learned Single

Judge of this Court on August 7, 2023, and came to be confirmed by the

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Supreme Court, resigned from the proceedings on January 16, 2025, after

allegations were levelled by Respondent No. 2 against the presiding

arbitrator.

5. Today, it is Respondent No. 2 that is objecting to this application being

allowed, this time on the premise that the existence of an arbitration

agreement between the Petitioner and Respondent No. 2 is in doubt, and the

arbitration agreement that Respondent No. 2 is a party to, is an agreement

between Respondent No. 1 and Respondent No. 2.

6. Even a plain reading of the record would show that the partnership

firm was not dissolved. The partnership firm continued. The arbitration

agreement is a clause contained in the partnership deed. At one point of time

in the life of the partnership firm, the Petitioner and Respondent No. 1 were

partners. At another point in time, the firm continued with Respondent No. 1

and Respondent No. 2 being partners. A partnership firm does not have an

existence independent of its partners. What liabilities an incoming partner

would have in respect of dues already incurred by a partnership firm with

unlimited liability, is a matter of evidence that the arbitral tribunal alone can

consider. The implications of being a partner at a subsequent period of time,

may or may not make such subsequent partner, a necessary party. That

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question to is entirely in the domain of the Learned Arbitral Tribunal, to deal

with whether or not Respondent No. 2 is a necessary party in the disputes

between the Petitioner and Respondent No. 1. It would be totally

inappropriate for this Court to delve deep into such matters of fact, which will

necessarily involve intrusion into matters of evidence, which are wholly

outside the jurisdiction of a Court under Section 11 the Act.

7. Learned Counsel for Respondent No. 2 submits a judgment of the

Supreme Court in Magic Eye Developers Pvt. Ltd. Vs. M/s. Green Edge

Infrastructure Pvt. Ltd.1 to suggest that the Section 11 Court must make an

inquiry into the privity of parties to the agreement. The law declared in the

aforesaid judgment has been comprehensively overtaken by subsequent

judgements of Larger Benches of the Supreme Court. The law governing the

scope of jurisdiction on the Section 11 Court is now well settled. The scope of

review under Section 11 is explicitly set out in Section 11(6A) of the Act. It is

now trite law, with particular regard to the decisions of a seven-judge bench

in the Interplay Judgement2 followed by multiple others, including SBI

General3 and Patel4 that the Section 11 Court ought not to venture beyond

examining the existence of a validly existing arbitration agreement that has

[2023] 5 S.C.R. 407

In Re: Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899 - (2024) 6 SCC 1

SBI General Insurance Co. Ltd. v. Krish Spinning - 2024 SCC OnLine SC 1754

Ajay Madhusudan Patel v. Jyotrindra S. Patel - 2024 SCC OnLine SC 2597

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been formally executed. Even questions of existential substance is a matter

that falls squarely in the domain of the arbitral tribunal, in view of Section 16

of the Act.

8. It is not for the Section 11 Court to sit in judgment about privity of

parties in a complex situation where partners enter and exit a continuing

partnership firm. It is equally noteworthy that Respondent No. 2 has already

taken out an application under Section 16 of the Act and the arbitral tribunal

is seized of this very issue. That apart, it is the allegations levelled by

Respondent No. 2 against the Presiding Arbitrator whose very appointment

was fought all the way to the Supreme Court, that appears to have led to the

Presiding Arbitrator having resigned. In any case, the Learned Arbitral

Tribunal will deal with the Section 16 Application already pending before it.

9. With the aforesaid directions, this application is finally disposed of in

the following terms :

A] Smt. Justice R.P. Sondurbaldota (Retd.), High Court Judge of this Court, is hereby appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreement referred to above;

B] A copy of this Order will be communicated to the Learned

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Sole Arbitrator by the Advocates for the Petitioner within a period of one week from the date on which this order is uploaded on the website of this Court. The Petitioner shall provide the contact and communication particulars of the parties to the Arbitral Tribunal along with a copy of this Order;

C] The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the parties within a period of two weeks from receipt of a copy of this Order;

D] The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration;

E] All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs.