Yasmin Khalique And Ors vs Mukhtar Alam
2021 Latest Caselaw 330 Cal/2

                      IN THE HIGH COURT AT CALCUTTA
                          Ordinary Original Civil Jurisdiction
                                   ORIGINAL SIDE

Present:-

THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA


                               A.P. 359 of 2020
                                 I.A No. G.A.1/2020

                           YASMIN KHALIQUE AND ORS.
                                          vs.
                                  MUKHTAR ALAM


For the petitioners                 :      Mr. Shyamal Sarkar, Sr. Adv.
                                           Mr. Sohail Haque, Adv.
                                           Mr. Imteyaz Aslam Lodhi, Adv.


For the respondent                  :      Mr. Jishnu Saha, Sr. Adv.
                                           Mr. Tarique Quasimuddin, Adv.
                                           Mrs. Zainab Tahur, Adv.
                                           Mr. Ishaan Saha, Adv.


Last Heard on                       :      15.03.2021

Delivered on                        :      25.03.2021




MOUSHUMI BHATTACHARYA, J.

1. This application is for setting aside of an interim Award dated 12th

November, 2020 passed by a learned Sole Arbitrator by which a Deed of

Partnership dated 1st April, 2006 of the petitioner no. 3, partnership firm

was declared to be a Partnership at Will and the partnership firm was

further declared dissolved consequent to a notice dated 17th November,

2018 issued by the respondent Award-holder under the provisions of the

Indian Partnership Act, 1932 (the Act). The petitioner, who seeks setting

aside of the Award, was the claimant before the learned Arbitrator.

2. The ground of challenge to the impugned Award is that the Deed of

Partnership dated 1st April, 2006 is not a Partnership at Will and that the

impugned Award is perverse and is patently illegal. It is also the

contention of the petitioners that the notice dated 17th November, 2018 for

dissolution of the partnership firm (petitioner no. 3 herein) invalidated the

orders of injunction passed by this court against the respondent. The

petitioner has also challenged the imposition of costs of Rs. 10 lakhs as

being exorbitant and perverse.

3. Mr. Shyamal Sarkar, learned Senior Counsel appearing for the

petitioners/Award-debtors, submits that the arbitrator's finding on the

issue of bad faith in the context of the origin of the business and use of

the trademark MUSA KA GUL was outside the scope of the reference

amounting to an error of jurisdiction. Counsel submits that there was no

evidence to support the said finding of the Arbitrator and that the finding

was at the "invitation" of the respondent, which deprived the petitioners of

an opportunity to assail the said finding. Counsel further challenges the

finding that Clause 3 of the Deed of Partnership would remain intact and

unaffected by Clauses 13 and 14 which deal with a partner's right to

retirement and the consequences following the death of a partner,

respectively. Counsel submits that the Arbitrator failed to identify the

correct clauses of the contract and therefore failed to arrive at a

harmonious construction of the clauses as well as the intention of the

parties. Counsel seeks to place emphasis on the fact that where the

Partnership Deed contained a provision for retirement of a partner, the

partnership cannot be a partnership at will and hence a notice of

dissolution would merely act as a notice of retirement and not as a notice

for the purpose of dissolution of the partnership firm. Counsel stresses on

the bad faith angle to the notice in view of the fact that the notice is

against orders of injunction passed by this court. Counsel relies on a

passage from Pollock and Mulla on the Law of Partnership (8th Edition) to

the effect that the intention to dissolve a firm may be inferred from

circumstances showing that the partner has, in fact, abandoned his

interest in the business and that the inference may be made from the

facts of each case as to whether a partner's interest in the partnership

firm has been abandoned or not. Counsel submits that the facts of the

case clearly show that the respondent has not abandoned his interest in

the partnership business even after notice of dissolution and that the

respondent has waived the effect of the notice of dissolution by continuing

with the business of the partnership firm.

4. Mr. Jishnu Saha, learned Senior Counsel for the

respondent/Award-holder relies on Clause 17 of the Partnership Deed

dated 1st April, 1992, which expressly provides that the partnership shall

be at will and may be dissolved by any of the partners by serving two

months notice in writing upon the other partners. Counsel submits that a

rectification of the Partnership Deed executed on 1st April, 2006 did not

vary the effect of the original Clause 17 of the Deed. It is hence submitted

that even after a fresh Deed of Partnership was executed on 1st April, 2006

reconstituting the petitioner no. 3 firm and inducting the petitioner no. 2

as one of its partners, the Deed continued to provide that the partnership

would be at will and shall be carried on by the parties on that basis.

Counsel seeks to sustain the Award on the ground that the Arbitrator

placed emphasis on the intent of the parties. Counsel submits that merely

because the Deed contains a provision for retirement of a partner, the

Partnership Deed does not cease to be a partnership at will and that

retirement of a partner would not by itself dissolve the partnership inter se

the other partners. Counsel urges that the same principle would also

apply to death of a partner and where the Deed provides that the

partnership shall be at will, a provision of the effect that death of a

partner shall not dissolve the firm, would not disturb the nature of the

partnership which would remain as one at will. Counsel relies on Abbott

vs. Abbott reported in (1936) 3 All ER 823 where the Chancery Division,

relying on Lindley on Partnership (7thEdn.) held that the result of a

contract of partnership is a partnership at will unless some agreement to

the contrary can be proved. On the issue of bad faith, counsel supports

the finding of the Arbitrator that the respondent has merely exercised his

statutory right under Section 43 of the Act to dissolve the petitioner no. 3

firm. Counsel submits that the respondent had disclosed its intention to

dissolve the petitioner No.3 firm before the Division-Bench of this court

and had proceeded to do just that in exercise of the statutory right

available to him under Section 43 of the Act. There was hence no question

of the respondent having acted in bad faith by issuing notice of dissolution

dated 17th November, 2018. Counsel submits that contrary to the grounds

in the present application, the reasoning of the Arbitrator is lucid and

intelligible, where both the factual aspect as well as the relevant law has

been meticulously discussed.

5. The impugned Award answered two issues, namely, whether the

Partnership Deed is a partnership at will and whether the firm stood

dissolved by the notice of dissolution dated 17th November, 2018. Before

proceeding to adjudicate on the grounds taken for setting aside of the

Award, the dispute which was before the Arbitrator is briefly stated. The

dispute relates to a Partnership Deed dated 1st April, 2006 in which the

petitioner nos.1 and 2 each held 25% share and the respondent held the

remaining 50%. The petitioner no.3 partnership firm is engaged in the

business of manufacturing tobacco gul under the brand "Musa Ka Gul".

The petitioners alleged that the respondent has been carrying on a rival

business to the detriment of the firm and the petitioners hence claimed an

Award for damages together with a declaration that the partnership could

not have been dissolved by the notice dated 17th November, 2018 served

by the respondent on the petitioner nos.1 and 2. The Arbitrator construed

the nature of the Partnership Deed as a partnership at will and held that

the notice of dissolution dated 17th November, 2018 issued by the

respondent dissolved the partnership firm.

6. The contentions of counsel before this court centre on the nature of

the Partnership Deed, the issue of bad faith in the notice of dissolution

and the grounds available under Section 34 of the Act on which the Award

should be set aside.

Construction of the Partnership Deed dated 1st April, 2006.

The relevant clauses of the Partnership Deed are as follows;

"3. THAT the Partnership is at will and shall be carried on by the parties hereto.

13. THAT any of the Partners may retire from the partnership business after giving one month's notice in writing to the other Partners, of his intention to do so. The Retiring Partner shall not be entitled to any goodwill of the firm.

14. THAT the partnership business shall not stand dissolved on the death of any of the Partners but shall be continued and carried on with the legal heir and/or representative of the partner so dying and on the same terms and conditions unless otherwise agreed upon between them and such legal representative or heir, in which case the amount standing to the credit of the deceased Partner shall be paid off to his/her legal heir and/or representative."

7. A plain reading of the above clauses would show that the parties

intended the partnership to be one at will and that a departure from such

a construction can only be called for if there is any inconsistency between

the above three clauses. The fact that the intention of the parties to treat

the partnership as one at will was not changed despite the firm being re-

constituted by a fresh Deed of Partnership in April 2006 is also relevant.

Section 7 of the Indian Partnership Act, 1932 provides as follows:

"7. Partnership at will. -Where no provision is made by contract between

the partners for the duration of their partnership, or for the determination of their

partnership, the partnership is 'partnership at will'."

The relevant part of Section 32 of the said Act provides that-

"32. Retirement of a partner. - (1) A partner may retire, --

(a) with the consent of all the other partners,

(b) in accordance with an express agreement by the partners, or

(c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.

8. Section 32(1)(c) hence makes it clear that a provision for retirement

in a Deed of Partnership is neither a provision for duration nor a provision

for determination as provided under Section 7 of the 1932 Act and the

partnership firm shall continue to subsist despite the notice evincing a

partner's intention to retire from the firm. The Arbitrator has relied on

Section 32 of the Act in support of the view that a partnership does not

cease to be a partnership at will merely because the Deed of Partnership

consists of a provision for retirement of a partner. The Arbitrator was of

the view that Clause 13 does not refer to either duration or determination

as a consequence of a partner's right to retire and similarly Clause 14

does not refer to duration but specifically provides that the partnership

shall not stand dissolved on the death of any of the partners. The

Arbitrator was hence of the view that the scope of Clause 3 of the

Partnership Deed did remain intact and unaffected since all the three

clauses can harmoniously co-exist. The conclusion of the Arbitrator can

be stretched also to apply to death of a partner where the effect of such

death would not dissolve the firm provided the partnership is one at will.

9. Abbott vs. Abbott of the Chancery Division reiterates this proposition

of law in view that the result of a contract of a partnership is a

partnership at will unless some agreement to the contrary can be proved.

Further, Keshavlal Lallubhai Patel vs. Patel Bhailal Narandas; AIR 1968

Guj 157 clarified the concept of "partnership at will" as essentially

involving two conditions, namely, that there should be no provision in the

contract between the partners for the duration of their partnership and

that there should also be no provision for the determination of the

partnership. This decision also supports the proposition that a provision

in the Partnership Deed for retirement of a partner does not constitute an

express provision in the contract between the partners for determination

of the partnership within the meaning of Section 7 of the 1932 Act and

hence does not exclude the partnership from the category of partnership

at will. Iqbalnath Premnath Anand vs. Rameshwarnath Premnath Anand;

AIR 1976 Bom 405 held that a notice of dissolution cannot be negatived if

the Partnership Deed is construed as one at will. Talakchand Kanji Vora

vs. Keshavlal Dullabajji Sheth; AIR 1973 Cal 279 rejected the contention

that the partnership cannot be a partnership at will if there is a

resignation clause. The Court held that in view of Section 32(1)(c), even in

a partnership at will, a partner can resign upon notice to the other

partners. In Gobardhan Chakraborty vs. Abani Mohan; AIR 1991 Cal 195,

the Court held that an implied term as to duration of a partnership cannot

be contrary to the express term. In all these decisions, the courts, upon

construction of the clauses of the Partnership Deeds, held that the

partnerships were at will and would not be affected by any clause relating

to retirement, death, resignation, etc. The decisions relied on by the

petitioners before this court have been shown in support of the

proposition that where there is a provision in the Partnership Deed for

retirement of a partner, the partnership cannot be a partnership at will

and a notice of dissolution would hence merely be a notice of retirement

which would not have the effect of dissolving the firm.

10. The learned Arbitrator found that the cases relied on by the

petitioners were based on facts which could not be applied to the present

case. The Arbitrator also relied on the rules of construction to opine that

Clauses 13 and 14 cannot be read in a manner which would dislodge the

efficacy of Clause 3 since that would amount to overriding an express

term of the Partnership Deed. The Arbitrator was also of the view that

primacy should be given to Clause 3 which declares that the partnership

would be a partnership at will and which would hence prevail over

Clauses 13 and 14.

11. The cases relied upon on behalf of the petitioners proceed on the

particular facts of the case where the court found the partnerships to be

terminable or of a fixed duration. Moss vs. Elphick; (1910) 1 KB 846 in the

King's Bench Division fell within the aforesaid scope. In Chandrika Parsad

Agarwal vs. Vishnu Chandra; 1981 SCC Online All 364, Clause 7 of the

Partnership Deed provided that the partnership shall not be dissolved on

the death of any of the parties. Suresh Kumar Sanghi vs. Amrit Kumar

Sanghi; 1981 SCC Online Del 12 noted the decision in Keshavlal Lallubhai

Patel, which contained a clear stipulation that the partnership was at will.

Mohinder Nath vs. Harender Nath; 1998 SCC Online Del 242 noticed the

relevant clauses of the Partnership Deed in question which specifically

provided that retirement or death of any partner shall not dissolve the

partnership which would continue between the remaining partners. Anant

Purushottam Athavale vs. Govind Purushottam Athavale; 2005 SCC Online

Bom 590 also took into account the Clauses 2, 11 and 12 of the Deed and

held that the partnership was not at will having regard to the explicit

language of Clause 12 of the Deed. Ramesh Kumar vs. Smt. Lata Devi;

2007 SCC Online MP 83 took into account Clauses 8 and 11 of the

Partnership Deed which made it evident that it was not the intention of

the parties to determine the partnership even in the case of the death or

retirement of a partner. Manohar Daulatram Ghansharamani vs.

Janardhan Prasad Chaturvedi; 2019 SCC Online Bom 1967 noted that the

Partnership Deed stipulated that the partnership shall come to an end

after the construction of the buildings on the property is completed and

the court relied on Section 42 of the Partnership Act in relation to

dissolution on the happening of certain contingencies. M.O.H Uduman vs.

M.O.H. Aslum; (1991) 1 SCC 412 relied on the settled canons of

construction that a contract of partnership must be read as a whole and

the intention of the parties must be gathered from the language used in

the contract. The decision of the court in that case was based on

contradictory nature of two clauses in the Partnership Deed.

12. None of the cases cited on behalf of the petitioners are in aid of the

proposition that when the Partnership Deed expressly provides that

clauses to the effect that the death or retirement of a partner will not

dissolve the firm, would negate the nature of the partnership which would

remain as one at will. In any event, each of these cases would have to be

seen in the context of the particular clauses of the Partnership Deed

which were in consideration before the court and unless the facts are

found to be identical to the present case, the cases cannot be of any

assistance to the petitioners.

Whether the notice dated 17th November, 2018 issued by the respondent was in bad faith.

The notice of dissolution dated 17th November, 2018 was issued by

the respondent under Section 43 of the 1932 Act which is set out below;

"43. Dissolution by notice of partnership at will. - (1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice."

13. The petitioners urge that the said notice was issued in bad faith and

for the mala fide object of avoiding the orders in Section 9 proceedings

before this Court. In this connection, the Arbitrator found that since the

partnership was a partnership at will, the respondent, as a partner, was

statutorily entitled to serve a notice for dissolution under Section 43 of the

Act. The Arbitrator also found that since the notice does not suffer from

ambiguity or infirmity in service, the legality of the notice cannot be called

into question. On the factual score, the Arbitrator was of the view that

there was nothing sinister or clandestine in issuing the notice and further

rejected the contention of the petitioners that the notice had been issued

to resist the orders passed by this court. The Arbitrator also took into

account the origin of the business and extensive use of the trademark of

the partnership firm over the years. It was noted that the family members

of the wider family became entitled to carry on the business of gul tobacco

under the trademark "Musa ka Gul Super" after the partnership firm was

started in 1970 by one Md. Musa and was continued by his sons, their

spouses and descendants over the years. Specific facts have been taken

into consideration by the Arbitrator in this context, including licence

agreements granted by the partnership firm to one M.M. Industries, for

use of the registered trademark, which was a partnership firm connected

to the family of the respondent. Similar licence agreements were granted

to extended members of the family, including the wife of the respondent

which persuaded the Arbitrator to consider the running of the business of

the extended family.

14. Upon considering the reasons in the Award, this court finds no

infirmity in the basis of the findings of the learned Arbitrator. The position

of the respondent before the Appeal Court on 15th November, 2018 in

A.P.350 of 2018 to the effect that the respondent had the option of

dissolving the firm cannot be a factor impairing the legality of the notice of

dissolution. Section 43 of the Partnership Act entitles the respondent as a

partner to dissolve the firm by giving notice in writing to the other

partners provided the partnership is one at will. Having found that the

partnership is, indeed one at will, the finding of the Arbitrator of an

absence of bad faith in the notice cannot therefore be amenable to

challenge.

15. Several contentions have been made on behalf of the petitioners for

setting aside the Award under the grounds enumerated under Section 34

of the Act. It has been urged that the Arbitrator wandered outside the

reference and dealt with matters not within his jurisdiction. The Award

has also been assailed as perverse for not being based on evidence. The

petitioners have also taken point of being deprived of an opportunity to

deal with the contentions of the respondent and further contend that the

impugned Award is in conflict with the public policy of India. Dyna

Technologies Private Ltd. vs. Crompton Greaves Ltd.; (2019) 20 SCC 1

required the reasons given in an Award to be intelligible and adequate;

Som Datt Builders Limited vs. State of Kerala; (2009) 10 SCC 259 has been

cited for the mandate of Section 31(3) of the Act which requires reasons to

be given in respect of an Award, unless parties agree otherwise.

Ssangyong Engineering and Construction Company Limited vs. National

Highways Authority of India; (2019) 15 SCC 131 specifies, among other

requirements, that an Arbitrator must construe the contract as a fair-

minded or reasonable person would and cautioned that the Arbitrator

must not wander outside the contract or deal with matters not allotted to

him. The aforesaid decisions are rallying-points for what an Award should

not be, i.e., devoid of reasons, containing reasons which are insufficient

and vague, dealing with matters outside the reference, disregarding

relevant evidence or taking into account irrelevant matters and construing

the terms of the contract in a manner that no reasonable man would have

done. The point however is to test whether the present Award falls into

any of the aforesaid categories which would render the Award vulnerable.

16. This Court is of the view that the Arbitrator has done a

commendable job in deciding the two essential issues which form the

basis of the Award. It may be clarified that the Award impugned is an

interim Award which was decided at the instance of an application filed by

the respondent for interim Award under Section 31(6) of the Act for

claiming that the partnership firm Md. Musa & Co. stood dissolved by the

notice dated 17th November, 2018 under Section 43 of the Partnership

Act. The Arbitrator recorded that the application was heard and decided

with the consent of counsel appearing for the parties and in consultation

with them. The Award has dealt with each of the two issues framed, in

detail and is replete with reasons which are lucid and sufficient taking

into account all the relevant facts. Accepting the grounds that the

Arbitrator did not give equal opportunity of hearing to learned counsel

appearing for the petitioners would be an unfair assessment of the Award

since the Arbitrator has noted that counsel for the petitioners was

permitted to dictate his submissions "in his own language and with his

own emphasis" which were incorporated as part of the Minutes of the

proceedings. Even otherwise, the recording of the facts in the Award

makes it amply clear that the Arbitrator took great pains to consider each

and every factual contention made on behalf of the petitioners. This Court

is, therefore, of the view that the Award cannot fall under any of the

grounds which have been urged on behalf of the petitioners or any of the

other grounds available under Section 34 of the Act.

17. The Award has also been challenged on the issue of cost of Rs.10

lakhs being imposed on the petitioners. The petitioners have challenged

the imposition of the costs of the aforesaid quantum as being

disproportionate and perverse. With regard to the said contention, it is

relevant to point out that Section 31A - "Regime for costs" - gives

discretion to an Arbitrator to determine whether costs are payable by a

party to the proceeding, including the amount of costs and the time when

such costs are to be paid [Section 31A(1)(a) to (c)]. The explanation to 31A

further provides that "costs" means reasonable costs relating to the fees of

the Arbitrators, legal fees and administration fees of the institution, etc.

Section 31A(3) further provides that in determining the costs, the Arbitral

Tribunal shall have regard to all the circumstances such as the conduct of

the parties, including any step taken by a party for delaying the

arbitration proceedings [31A(3)(a) and a part of (c)].

18. It is evident, therefore, that the 1996 Act, after the 2015

amendment, empowers an Arbitral Tribunal to impose costs provided such

imposition comes under any of the grounds enumerated under Section

31A. In the present case, the Arbitrator has noted that the petitioners

have taken the advantage of the leave granted by the Arbitrator to have

their submissions recorded in the Minutes of the proceedings which

prolonged the hearing of the respondent's application for an interim

Award. It is also evident from the papers before this court that the

petitioners did not make any attempt to shorten the proceedings despite

the adjudication being on a clear-cut and focused issue relating to the

construction of the Partnership Deed itself. Although the reasons given by

the learned Arbitrator for imposing the costs are discernible from the

Award itself, this court is inclined to reduce the quantum of the costs

which have been imposed on the petitioners and substitute Rs.10 lakhs

with Rs.5 lakhs. The Award is hence modified to the extent of the

petitioners being liable to payment of a sum of Rs.5 lakhs towards costs of

proceedings which has to be paid by the petitioners to the respondent.

19. This court finds no reason to interfere with the other parts of the

Award which shall remain unchanged and hence undisturbed in the

context of the present application. It is also made clear that this judgment

has been pronounced on both of the applications filed by the petitioners,

namely, under Section 36(3) and Section 34 of the 1996 Act as had been

agreed by counsel appearing for the parties at the very beginning.

20. A.P.359 of 2020 and G.A.1 of 2020 are accordingly dismissed in

terms of this judgment. The impugned Award dated 12 November, 2020 is

upheld and only modified to the extent of the costs imposed on the

petitioners as indicated above.

Urgent Photostat certified copy of this Judgment, if applied for, be

supplied to the parties upon compliance of all requisite formalities.

(MOUSHUMI BHATTACHARYA, J.)