Dipakkumar Nathabhai Patel vs Narmadaben Dhirajlal Radadia
2022 Latest Caselaw 7013 Guj

  C/IAAP/173/2018                                 CAV JUDGMENT DATED: 05/08/2022




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/PETN. UNDER ARBITRATION ACT NO. 173 of 2018

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DIPAKKUMAR NATHABHAI PATEL Versus NARMADABEN DHIRAJLAL RADADIA & 2 other(s) ========================================================== Appearance:

MR JIGAR G GADHAVI(5613) for the Petitioner(s) No. 1 MR DIPEN C SHAH(3374) for the Respondent(s) No. 1,2 MR. RADHESH Y VYAS(7060) for the Respondent(s) No. 3 ==========================================================

CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR

Date : 05/08/2022

CAV JUDGMENT

1. This petition is filed under section 11(6) of the

Arbitration and Conciliation Act, 1996 (hereinafter

referred to as 'the Act' for short) seeking appointment of

Arbitrator contending inter alia that petitioner and

respondents had entered into a partnership agreement on

02.03.1994 and one of the partner namely Rameshbhai

Ishwarbhai Patel was relieved from the partnership and

thereafter a new partnership agreement came to be

executed on 01.07.1998 under which the petitioner -

applicant and the respondent Nos. 1 to 3 became partners

of the firm under which the applicant has been given 25%

of the share. It is further contended that on account of

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certain disputes having arisen between applicant and

respondents, the applicant had filed a Regular Civil Suit

No. 486 of 2005 before Civil Judge (Senior Division),

Vadodara as well as Regular Civil Suit No. 409 of 2006

and Regular Civil Suit No. 746 of 2007 for various reliefs,

which came to be disposed of on the ground that deed of

partnership contained arbitration clause. Hence, it is

stated that on disposal of suits, applicant had got issued

notices to the respondents calling upon the respondents to

give their consent for appointment of sole arbitrator, to

which the respondent No. 1 objected. Respondent No. 3

did not object and no reply is issued by respondent No. 2.

Hence, applicant has sought for appointment of an

arbitrator.

2. On notice being issued, respondent No. 1 appeared

and filed affidavit-in-reply denying the averments made in

the petition except to the extent expressly admitted

thereunder. It is stated that "Aadarsh Pharmacy and

General" was an unregistered firm and was reconstituted

by partnership deed dated 01.07.1998, whereunder it was

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agreed that partnership was determinable at Will. It is

also stated that said partnership was dissolved in the year

2005 after meeting came to be held on 09.05.2005,

wherein it was agreed by the partners that petitioner

would be removed from the firm and consequently

dissolved the firm. It is contended that in furtherance of

the meeting, minutes came to be drawn and respondent

Nos. 2 and 3 executed a dissolution deed dated 16.05.2005

and even on request being made, petitioner did not affix

his signature to the said dissolution deed and as such

respondent No. 1 is said to have intimated the applicant

on 16.05.2005 about his removal from the Firm and

consequently dissolution of the firm. It is further

contended that in the suits which came to be filed, the

respondent No. 1 had filed an application under section 8

of the Act which came to be allowed and suit came to be

disposed of vide order dated 08.03.2007. It is contended

that thereafter petitioner filed third suit being Regular

Civil Suit No. 764 of 2007, which came to be disposed of

vide order dated 10.06.2013. Hence, contending that

claim of the petitioner is hopelessly barred by limitation

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and by attempting to revive the dead cause of action, the

present application has been filed. Hence, 1st respondent

has prayed for dismissal of this application.

3. Heard Shri Jigar Gadhvi, learned advocate appearing

for petitioner and Shri Dipen Shah, learned advocate

appearing for respondents. Perused the records.

4. Undisputedly, it emerges from the available records

that partnership deed entered into between the parties on

01.07.1998 was an unregistered firm. The said partnership

firm was not registered as required under section 59 of

the Partnership Act. The said partnership deed provided

for an arbitration clause. The dispute which arose

between the petitioner / applicant on one hand and first

respondent on the other hand namely the petitioner who

claims to have been illegally removed from the partnership

firm. Whereas respondent No. 1 has contended that a

meeting was held on 09.05.2005 wherein all the partners

of the firm participated and it was resolved to remove the

petitioner as partner of the firm and it was also resolved

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thereunder to dissolve the firm. The petitioner is said to

have not affixed his signature to the minutes of said

meeting. Respondent No. 1 also claims that respondent

No. 2 and 3 executed a dissolution deed dated 16.05.2005

evidencing their removal as partners of the firm and

consequently dissolution of the entire firm. On such

removal, the respondent No. 1 has intimated the petitioner

on 16.05.2005 which is also admitted by petitioner -

applicant. Petitioner has also admitted that respondent

no. 1 gave a public notice on 19.05.2005 in Gujarat

Samachar daily newspaper that applicant and respondent

no. 3 had been removed from the partnership firm and

publication of such notice is also admitted by the

petitioner in paragraph 2.4 of the application.

5. The applicant herein filed a suit being Regular Civil

Suit No. 486 of 2005 to declare his removal as illegal. In

the said suit, an application under Order VII Rule 11 of

CPC came to be filed by first respondent herein, which

came to be allowed vide order dated 04.09.2018. During

the pendency of the said suit, applicant - petitioner filed

Regular Civil Suit being No. 409 of 2006 for settlement of

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accounts consequent upon dissolution of the firm, in which

suit, first respondent filed an application under section 8

of the Act which came to be allowed vide order dated

08.03.2007 and directed the parties to proceed to resolve

the disputes through arbitration.

6. These two orders namely order dated 08.03.2007

(allowing the application of respondent No. 1 filed under

section 8 of the Act in Regular Civil Suit No. 409 of 2006)

and order dated 04.09.2018 (passed in Regular Civil Suit

No. 486 of 2005 allowing the application under Order VII

Rule 11 of CPC) have undisputedly attained finality. The

3rd suit which came to be filed namely Regular Civil Suit

No. 764 of 2007 for declaration and permanent injunction

was also disposed of vide order dated 10.06.2013 in light

of an application filed by respondent no. 1 herein under

section 8 of the Act. This order also attained finality.

Thus, the petitioner has accepted orders dated

08.03.2007, 04.09.2018 and 10.06.2013.

7. Petitioner is attempting to take umbrage under the

order dated 04.09.2018 passed in Regular Civil Suit No.

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486 of 2005 to contend that cause of action for seeking

appointment of Arbitrator arose on disposal of the said

suit. It also requires to be noted at this stage that

aforesaid order dated 04.09.2018 which came to be passed

on an application (Exh. 33) filed in Regular Civil Suit No.

409 of 2006 for rejection of plaint under Order VII Rule 11

contending inter alia that Court had already passed an

order on 08.03.2007 on Exh. 29-A namely an application

filed under section 8 had been allowed, by virtue of which

the proceedings had come to an end and as such no

purpose would be served by keeping the suit pending.

This application as noticed hereinabove came to be

allowed on 02.07.2018 and it had attained finality. Thus,

nothing remained further to be done and as such a quietus

came to be given to the said suit Regular Civil Suit No.

409 of 2006.

8. It would further emerge from the pleading of the

parties that petitioner was purportedly or allegedly

removed from the partnership firm constituted under deed

of partnership dated 01.07.1998 on 16.05.2005.

Respondent No. 1 even according to petitioner forwarded

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the deed of dissolution to be signed by the petitioner,

which was not admittedly signed by petitioner. By notice

dated 19.05.2005, respondent no. 1 intimated the

petitioner of his removal from the firm and had requested

the petitioner to affix his signature to the deed of

dissolution. This was followed by issuance of a notice by

respondent No. 1 to petitioner on 25.05.2005 intimating

the petitioner about dissolution of firm and removal of

petitioner by majority of partners.

9. First respondent also gave a public notice on

09.06.2005 in Gujarat Samachar. All these facts were well

within the knowledge of petitioner. This triggered the

petitioner to file three suits namely Regular Civil Suit Nos.

486 of 2005, 409 of 2006 and 746 of 2007 above referred

to. In Regular Civil Suit No. 409 of 2006, respondent No.

1 herein filed an application under section 8 of the Act

contending inter alia that dispute is squarely covered by

arbitration clause and as such parties are to be relegated

to the arbitration and civil suits should not be proceeded

with. As noticed hereinabove and at the cost of repetition,

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it can be noticed that said application was allowed vide

order dated 08.03.2007. In the Regular Civil Suit No. 486

of 2005, an application came to be filed by respondent no.

1 herein under Order VII Rule 11 for rejection of plaint

and same was allowed and plaint came to be rejected vide

order dated 04.09.2018 on the ground suit was not

maintainable. Even, in the third suit viz. Regular Civil Suit

No. 764 of 2007 filed by petitioner for declaration, the

application filed by first respondent herein under section 8

of the Act by respondent No. 1 herein came to be allowed

on 10.06.2013. The sum and substance of the claim of

petitioner in these three suits was for declaring his

removal as illegal; for rendition of accounts of the firm;

and consequently relief of perpetual injunction. By virtue

of order of proceedings of two suits having been stopped

by trial court way back in 2007 i.e. on 08.03.2007 and

10.06.2013 respectively, the cause of action, if any, for the

petitioner to file an application under section 11(6) of the

Act to pursue his claim against 1st respondent on the

ground it was alive was on disposal of these two

applications. Infact, it can be gainsaid that on allowing of

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application on 08.03.2007, the petitioner ought to have

approached this Court seeking for appointment of an

Arbitrator. He did not do so for reasons best known.

However, after disposal of suit Regular Civil Suit No. 486

of 2005 on 04.09.2018, namely allowing of application

filed on 12.07.2005 under Order VII Rule 11 by respondent

No. 1 herein, the petitioner is now attempting to contend

that present application filed under section 11(6) on

24.09.2018 is well within time or still he would be entitled

to maintain his claim for payment from 1 st respondent or

rendition of accounts by respondent No. 1.

10. Section 43(1) of the Act indicate that the

Limitation Act, 1963 shall apply to arbitration as it applies

to the Court proceedings. A perusal of sub-section (2) of

Section 43 would indicate that for the purposes of

Arbitration Act and Limitation Act, arbitration shall be

deemed to have commenced on the date referred to in

Section 21. Normally the issue of limitation being

question of fact/s and the Law governing the same would

be procedural, it would always be open for the Arbitral

Tribunal to decide based on the facts that may be unfolded

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in a given case. However, this Court exercising the power

of referring the dispute to arbitration, would refuse to do

so when it is manifest that claims are ex-facie time barred

and dead or there is no subsisting dispute. The Hon'ble

Apex Court in the case of Vidya Drolia and Others

versus Durga Trading Corporation reported in (2021)

2 SCC 1, has held : -

"147.11 The interpretation appropriately balances the allocation of the decision-making authority between the court at the referral stage and the arbitrators' primary jurisdiction to decide disputes on merits. The court as the judicial forum of the first instance can exercise prima facie test jurisdiction to screen and knockdown ex facie meritless, frivolous and dishonest litigation. Limited jurisdiction of the courts ensures expeditious, alacritous and efficient disposal when required at the referral stage."

11. The Hon'ble Apex Court in a recent judgment

in the case of Bharat Sanchar Nigam Limited and

Another versus Nortel Networds India Private

Limited reported in (2021) 5 SCC 738, has held : -

"45. In a recent judgment delivered by a three-Judge Bench in Vidya Drolia v. Durga Trading Corporation, on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out "manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes." The prima facie review at the reference stage is to cut the deadwood, where dismissal is barefaced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement

C/IAAP/173/2018 CAV JUDGMENT DATED: 05/08/2022

exists, or that the subject matter is not arbitrable, that reference may be refused.

45.1 In paragraph 144, the Court observed that the judgment in Mayavati Trading had rightly held that the judgment in Patel Engineering had been legislatively overruled. Paragraph 144 reads as :

"144. As observed earlier, Patel Engg. Ltd. explains and holds that Section 8 and 11 are complementary in nature as both relate to reference to arbitration. Section 8 applies when judicial proceeding is pending and an application is filed for stay of judicial proceeding and for reference to arbitration. Amendments to Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the situation where the parties approach a court for appointment of an arbitrator. Mayavati Trading (P) Ltd., in our humble opinion, rightly holds that Patel Engg. Ltd. has been legislatively overruled and hence would not apply even post omission of sub-section (6-A) to Section 11 of the Arbitration Act. Mayavati Trading (P) Ltd. has elaborated upon the object and purposes and history of the amendment to Section 11, with reference to sub-section (6-A) to elucidate that the section, as originally enacted, was facsimile with Article 11 of the Uncitral Model of law of arbitration on which the Arbitration Act was drafted and enacted." (emphasis supplied)

While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead, or there is no subsisting dispute. Paragraph 148 of the judgment reads as follows :

"148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-

section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date

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referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed "no-claim certificate" or defence on the plea of novation and "accord and satisfaction". As observed in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)], it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues that have arisen."

[emphasis supplied)

45.2 In paragraph 154.4, it has been concluded that :

"154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable"

and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative

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dispute resolution mechanism." (emphasis supplied)

46. The upshot of the judgment in Vidya Drolia is affirmation of the position of law expounded in Duro Felguera and Mayavati Trading, which continue to hold the field. It must be understood clearly that Vidya Drolia has not re-surrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engg. Ltd. (supra).

47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non- arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.

48. Applying the law to the facts of the present case, it is clear that this is a case where the claims are ex facie time barred by over 5½ years, since Nortel did not take any action whatsoever after the rejection of its claim by BSNL on 04.08.2014. The notice of arbitration was invoked on 29.04.2020. There is not even an averment either in the notice of arbitration, or the petition filed under Section 11, or before this Court, of any intervening facts which may have occurred, which would extend the period of limitation falling within Sections 5 to 20 of the Limitation Act. Unless, there is a pleaded case specifically adverting to the applicable Section, and how it extends the limitation from the date on which the cause of action originally arose, there can be no basis to save the time of limitation."

12. Applying the aforesaid authoritative principles

of law laid down by the Hon'ble Apex Court, when the

facts on hand are looked into, at the cost of repetition, it

would emerge therefrom that even according to the

petitioner, he was removed from the firm on 09.05.2005

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and deed of dissolution was forwarded to him by first

respondent on 16.05.2005, followed by issuance of legal

notice dated 19.05.2005 as well as publication of

advertisement in Gujarat Samachar on 09.06.2005. This

would evidence the fact that petitioner was well within the

knowledge of he having been removed from the firm.

Thus, cause of action having arisen on 16.05.2005,

19.05.2005 or on 09.06.2005 for invoking arbitration

clause, for reasons best known, petitioner did not seek

such recourse. On the other hand, petitioner filed a suit

being R.C.S. No. 486 of 2005 for declaration of his

removal as illegal and to grant injunction from preventing

him from entering the shop premises, in which suit no

interim order came to be passed in his favour. Be that as

it may. Yet another suit being Regular Civil Application

No. 409 of 2006 for settlement of accounts came to be

filed in which an application under section 8 of the Act was

filed by respondent No. 1 herein on 18.11.2006 which

came to be allowed on 08.03.2007. As noticed

herreinabove, third suit viz. Regular Civil Suit No. 764 of

2007 came to be filed for declaration and permanent

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injunction and it came to be disposed of 10.06.2013. In

Regular Civil Suit No. 486 of 2005, an application under

Order VII Rule 11 for rejection of plaint came to be filed

and learned trial Judge after taking note of the facts that

in Regular Civil Suit No. 409 of 2006, the proceedings

therein had been stopped and subsequent suit would not

be maintainable, rejected the plaint by order dated

04.09.2018. It is thereafter petitioner has attempted to

revive dead cause of action by filing this application. Even

according to petitioner, cause of action arose on his

alleged removal way back on 09.05.2005 and instead of

taking recourse to invoke arbitration clause and seek for

settlement of his claim immediately thereafter assuming

he had a right to do so, he resorted to file Civil Suit and

even after first order came to be passed in Regular Cisil

Suit No. 409 of 2006 on 08.03.2007 if being construed as

the date on which petitioner had cause of action for filing

an application under section 11(6) for appointment of an

Arbitrator, he did not choose to do so and said cause of

action to sue had stood extinguished on expiry of three

years period even if it had commenced on 07.03.2010 and

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as such by the present application filed on 24.09.2018

under section 11(6) of the Act, petitioner cannot be

allowed to urge his claim on the basis of a dead cause of

action or revive the claim which is barred by Law of

Limitation namely not raising it within three years from

the date cause of action arose.

13. Hence, this Court is of the considered view that

petition filed under section 11(6) is not maintainable and it

is liable to be rejected.

For, reasons aforestated, I proceed to pass

following :

ORDER

(i) IAAP No. 173 of 2018 is DISMISSED.

(ii) No order as to costs.

(ARAVIND KUMAR,CJ) AMAR SINGH