Dr. Balwant Harshey vs National Hospital (Partnership ...
2023 Latest Caselaw 8362 MP

                                                                     1

IN           THE                 HIGH              COURT OF MADHYA PRADESH
                                                   AT JABALPUR
                                                            BEFORE
                      HON'BLE SHRI JUSTICE SANJAY DWIVEDI
                                        ON THE 12TH OF JUNE, 2023
                                                   A.C. No.56 of 2021
BETWEEN:-

1.                      DR. BALWANT HARSHEY S/O LATE M.G.
                        HARSHEY, AGED ABOUT 62 YEARS,
                        RESIDENT OF 659 GOLE BAZAR,
                        JABALPUR (M.P.)
2.                      SMT. SUNITA DUBEY W/O DR. SHASHANK
                        DUBEY, AGED ABOUT ADULT, RESIDENT
                        OF 1417, WRIGHT TOWN, JABALPUR
                        (M.P.)
                                                                                                                 ......APPLICANTS
(BY SHRI ARJUN BAJPAI - ADVOCATE)
AND

NATIONAL HOSPITAL (PARTNERSHIP FIRM) 703,
GOLE BAZAR, JABALPUR (M.P.) THROUGH ITS
REMAINING PARTNERS:-
            1.        DR. ATUL CHOUBEY S/O LATE DAYA
                      SHANKAR CHOUBEY, PROFESSOR OF
                      PAEDIATRICS, SHRI SHANKRACHARYA
                      INSTITUTE OF MEDICAL SCIENCES,
                      JUNWANI, BHILLAI (C.G.)
            2.        DR. AJAY VISHNOI S/O SHRI G.S. VISHNOI,
                      RESIDENT OF 36 NAYA GAON, JABALPUR
                      (M.P.)
            3.        SHRI HIMANSHU TIWARI S/O SHRI
                      ANAND K. TIWARI, RESIDENT OF 1403-04,
                      BESIDE PF OFFICE, VIJAY NAGAR,
                      JABALPUR (M.P.)
                                                                                                            ......RESPONDENTS
                                                                                                              NON-APPLICANTS
(BY SHRI AMIT SETH - ADVOCATE)
................................................................................................................................................
                                                                      2

Reserved on                : 03.04.2023
Pronounced on : 12.06.2023
................................................................................................................................................
                        This application having been heard and reserved for orders,
coming on for pronouncement this day, the Court pronounced the
following:
                                                                    ORDER

Pleadings are complete. The parties agreed to argue the matter finally, accordingly, it is finally heard.

2. This application has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the 'Act, 1996') with a relief to appoint an arbitrator and to refer the dispute to him as per Clause 15 of the partnership-deed dated 16.04.2003.

3. It is averred in the application that the applicants and the respondents are partners of a firm which was constituted to run a hospital with the name and style 'National Hospital'. The partners originally entered into an agreement with partnership-deed dated 01.04.1998 and terms of partnership were reduced in writing in the same.

4. One of the partners namely Malti Harshey expired on 15.04.2003 which had given a cause to execute second partnership-deed amongst the then surviving partners and then a deed was written on 16.04.2003 containing pari materia terms which were referred in earlier partnership-deed dated 01.04.1998.

5. Initially the operation of partnership firm was being carried out in cordial and smooth manner, but later on several financial and managerial anomalies were noticed in running the hospital business. It is also noticed that some of the partners have taken undue financial gain

by committing financial irregularities and there were no concurrence amongst the partners and as such, dispute arose amongst them. Although, in the application certain amount of financial irregularities mentioned so as to substantiate that the dispute is existing amongst partners because of those financial irregularities and as per the terms of partnership, it is necessary to resolve the said dispute and, therefore, they moved the present application for appointing an Arbitrator and dispute be referred to him so as to get the dispute resolved.

6. The application has been opposed by the respondents/non- applicants represented by counsel Shri Amit Seth and at the threshold Shri Seth has pointed out that in any case the proposed Arbitrator cannot be appointed because of his appearance in the matter. He has also filed reply to the application saying that the application deserves to be dismissed for two reasons; firstly, the allegations made in the application by the applicants showing financial irregularities alleged to have been committed by some of the partners and also some shortcomings in the working, do not fall within the dispute which could be referred to the Arbitrator. According to Shri Seth, all the allegations are based upon fictitious figure and for no reason the applicants are requesting for appointing the Arbitrator. He submits that when there is no dispute, nothing can be referred to the Arbitrator and nothing can be decided by him. Secondly, the partnership-deed dated 16.04.2003 relied by the applicants is an unregistered document executed on a stamp paper of Rs.1000/-. He submits that the said agreement is not enforceable and, therefore, on the basis of terms of the said partnership-deed, the applicants cannot make request for appointing an Arbitrator or to refer the dispute to him.

7. Although, the counsel for both the parties have relied upon

several judgments and orders passed on the said issue whether the Arbitrator can be appointed under such circumstances or not and also with regard to the fact whether the partnership-deed dated 16.04.2003 is enforceable or not. It is also apprised by the counsel for the parties to the Court that the issue with regard to the fact whether partnership-deed not duly stamped is enforceable or not and in view of the terms contained in the said agreement, Arbitrator can be appointed or not, is pending consideration in a reference made to the Lager Bench of the Supreme Court. The Supreme Court in a case of M/s N.N. Global Mercantile Private Limited Vs. M/s Indo Unique Flame Ltd. & others referred the dispute to the Large Bench and during the pendency of this application reference has been answered.

8. It is indisputable that the partnership-deed was executed on a stamp paper of Rs.1000/- and it was not duly stamped. The Supreme Court while answering the reference in Civil Appeal No (S).3802-3803 of 2020 M/s N.N. Global Mercantile Private Limited Vs. M/s Indo Unique Flame Ltd. & others, has observed as under:-

"109. The view taken in SMS Tea Estates (supra) as followed in Garware (supra) and by the Bench in Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram and other Charities v. Bhaskar Raju and Brothers as to the effect of an unstamped contract containing an Arbitration Agreement and the steps to be taken by the Court, represent the correct position in law as explained by us hereinbefore. N.N. Global (supra) was wrongly decided, when it held to the contrary and overruled SMS Tea Estates (supra) and Garware (supra).

110. An instrument, which is exigible to stamp duty, may contain an Arbitration Clause and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under Section 2(g) of the Contract Act. An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law,

cannot, therefore, exist in law. Therefore, we approve of paragraphs-22 and 29 of Garware (supra). To this extent, we also approve of Vidya Drolia (supra), insofar as the reasoning in paragraphs-22 and 29 of Garware (supra) is approved.

111. The true intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an Arbitration Agreement.

112. The Scheme permits the Court, under Section 11 of the Act, acting on the basis of the original agreement or on a certified copy. The certified copy must, however, clearly indicate the stamp duty paid as held in SMS Tea Estates (supra). If it does not do so, the Court should not act on such a certified copy.

113. If the original of the instrument is produced and it is unstamped, the Court, acting under Section 11, is duty- bound to act under Section 33 of the Stamp Act as explained hereinbefore. When it does so, needless to say, the other provisions, which, in the case of the payment of the duty and penalty would culminate in the certificate under Section 42(2) of the Stamp Act, would also apply. When such a stage arises, the Court will be free to process the Application as per law.

114. An Arbitration Agreement, within the meaning of Section 7 of the Act, which attracts stamp duty and which is not stamped or insufficiently stamped, cannot be acted upon, in view of Section 35 of the Stamp Act, unless following impounding and payment of the requisite duty, necessary certificate is provided under Section 42 of the Stamp Act.

115. We further hold that the provisions of Sections 33 and the bar under Section 35 of the Stamp Act, applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Stamp Act, would render the Arbitration Agreement contained in such instrument as being non-existent in law unless the instrument is validated under the Stamp Act.

116. In a given case, the Court has power under paragraph-5 of the Scheme, to seek information from a party, even in regard to stamp duty.

117. We make it clear that we have not pronounced on the matter with reference to Section 9 of the Act. The reference to the Constitution Bench shall stand answered

accordingly.

118. We record our deep sense of appreciation for the efforts put in by Shri Gourab Banerji, learned senior counsel who has ably assisted this Court as Amicus."

9. Thus, in view of the law laid down by the Supreme Court while answering the reference, I am of the opinion that the application moved by the applicants in view of the terms of partnership-deed dated 16.04.2003 is not maintainable because the said partnership- deed/agreement is not enforceable as the same is not duly stamped. The application submitted by the applicants is therefore, dismissed. However, liberty is granted to the applicants if the partnership-deed dated 16.04.2003 is duly stamped then they may move a fresh application on the basis of valid and duly stamped partnership- deed/agreement.

10. With the aforesaid, this application (arbitration case) is dismissed.

11. Pending applications, if any, shall stands disposed of.

(SANJAY DWIVEDI) JUDGE ac/-

ANIL CHOUDHARY 2023.06.14 11:14:58 +05'30'