P.K. Kadam vs A.K. Rekhi
2000 Latest Caselaw 458 Del

ORDER

Mukul Mudgal, J.

1. This is a petition under Section 8 of the Arbitration & Conciliation Act, 1996, seeking a reference of disputes/claims to the Arbitrator for adjudication.

2. The petitioner has relied upon the Arbitration Clause contained in Annexure-A which is the Agreement dated 1.9.1995 between the parties.

3. The arbitration clause of the said Agreement reads as follows:

"That all disputes and questions in connection with the partnership or this deed arising between the partners or between any one of them or their legal representatives and whether during or after the partnership, shall be referred to the arbitrator in accordance with the provisions of Arbitration Act, then in force."

4. The dispute between the parties as per the petitioner is said to have arisen out of a partnership formed by the said Partnership Deed dated 1.9.1995. In the reply filed on behalf of the respondents, the plea for appointment of an arbitrator is resisted inter-alia on the ground that the petitioner has not made out any dispute which is required to be referred to the arbitrator. It is the respondent's plea that there is no referable dispute as all accounts of the firm were mutually settled and closed in 1996. It is further stated that there were no contracts in the name of partnership during the subsistence of partnership from 1st September,1995 to 31st March, 1996 as the petitioner did not contribute any capital in terms of the partnership deed which was dissolved with effect from 31.03.1996. It s further submitted that the petition is barred by limitation as on 30.12.1996 the petitioner himself had given a declaration that he does not have any claim in the said partnership firm.

5. It is also stated that the partnership deed not being registered the bar of Section 69(2) applies and the dispute is therefore, not referable to arbitration. In so far as the plea of bar under Section 69 is concerned, the learned counsel for the petitioner has relied upon the judgment of the Hon'ble Supreme Court reported as Prabhu Shankar Jaiswal Vs. Sheo Narain Jaiswal & Ors. to contend that the bar of Section 69(2) relating to an unregistered firm is not applicable in the dispute interest between the parties.

6. The relevant Paragraph of the aforesaid judgment reads as follows:

"Our attention was drawn to the case of Jagdish Chandra Gupta Vs. Kajaria Traders (India) Ltd. where this Court has held that the word 'proceedings' in the first part of sub-section (3) must be widely construed to include proceedings in arbitration. The exception carved out under sub-section (3)(a) would equally apply to such proceedings. The dispute, however, in that case between the partners did not relate to dissolution or accounts of the partnership firm. Hence a resort to the exception under sub-section (3)(a) was not required. In fact, this aspect was neither argued nor considered by this Court in that case. This question directly arose in Prem Lata Vs. Ishar Dass Chaman Lal, . This Court has held that a suit under Section 20 of the Arbitration Act was maintainable under the exception carved out in sub-section (3)(a) of Section 69 of the Indian Partnership Act. Hence where arbitration is sought under the arbitration clause in a partnership deed of an unregistered firm for the purpose of dissolution and accounts of the partnership firm, the partners can maintain all applications/petitions under the arbitration Act for the purpose of enforcing their right to secure dissolution and accounts of the partnership firm through arbitration. In fact, in the present case the suit for dissolution and accounts of the partnership firm has been stayed under Section 34 of the Arbitration Act at the instance of Respondent 1. The petition of the appellant, therefore, under Section 8 of the Arbitration is maintainable in the present case."

7. Thus the plea of the respondent as to the non-registration of the firm as being a bar under Section 69(2) is covered by the position of law laid down by the aforesaid judgment by the Hon'ble Supreme Court in Prabhu Shankar Jaiswal (supra) and has to fail.

8. Insofar as the question of limitation is concerned, the learned counsel for the petitioner has relied upon a judgment of Hon'ble Supreme Court in Morer Mondal S.S.K. Ltd. Vs. New India Assurance Co. Ltd., to contend that the limitation in so far as an arbitration application is concerned begins 15 days after the service of notice under Section 8(2) of the Arbitration Act, 1940 which corresponds to Section 11 of the Arbitration & Conciliation Act, 1996. Since the petitioner sent a notice on 22.4.99 under Section 11 of the Act, in view of the above position of law, the petition would be within limitation and this plea of the respondent is without substance.

9. The respondent's case is that the bar of limitation applies as the firm was dissolved with effect from 31.3.96 after due notice sent for this purpose on 18.3.96. The respondent has relied upon a Notice dated 18.3.96 which letter bears the notation of Regd. AD/UPC. However, only the posting certificate has been annexed which shows that the letter was sent under UPC. According to the learned counsel for the petitioner in view of the law laid down in Bharti Rani Singh Vs. Rajinder Singh Bedi 1997 III AD (DELHI) 1068 notice sent under UPC is not sufficient to demonstrate the proof of service under Section 114 of the Evidence Act. Thus this plea of the respondent that the notice was sent on 18.3.96 cannot be believed in view of the position of law laid down by Bharti Rani Singh's case (Supra).

10. It is further submitted by the petitioner that the partnership having been said to have been dissolved with effect from 31.3.96 by virtue of the notice given on 18.3.96 is an afterthought. The respondent submits that petitioner having given a declaration on 30.12.96 about the retirement from the firm with effect from 1.4.96 the present dispute was beyond limitation. This is however contradicted by the petitioner by contending that even after 31.3.96 on 9.4.96 a tender was submitted to B.H.E.L. The last two lines of the declaration dated 30.12.96, according to the petitioner, have been typed afterwards as demonstrated by the different spacing. The petitioner has further stated that no stand of dissolution of the partnership was taken by the respondents in reply to the legal notice dated 21.5.99 and the contradictory stand taken on behalf of the respondent was that the petitioner was never a partner with the respondent. In view of the above facts and in particular the fact that the reply of the respondent to the petitioner's notice dated 21.5.99 did not contain an averment regarding the dissolution of the partnership with effect from 31.4.96 it is not possible to sustain this plea of the respondent about the dissolution of the firm on 31.3.96.

11. Furthermore on a perusal of the said judgment Morena Mandal S.S.K. Ltd. (Supra), the submission of the petitioner that notice under Section 11 having been sent to the respondent on 22.4.99 seems to be correct and the bar of limitation will not come into play.

12. In this view of the matter all the pleas raised by the respondents to resist reference to arbitration lack merit and are rejected. In view of the arbitration clause contained in the agreement between the parties, this is a fit case for reference of disputes/claims between the parties to arbitration.

13. Accordingly in accordance with Clause 18 of the Partnership Deed between the parties, the disputes/claims between the parties as enumerated in Para 7(1) of the petition are referred to the arbitration of Mr. Justice D.R.Khanna, a retired Judge of this Court. The Arbitrator will give his award within four months from the date of entering upon the reference. The Arbitrator to fix his fees in consultation with the parties.

The petition is accordingly allowed with no order as to costs.