S.Sudhakar vs S.Giridharan
2022 Latest Caselaw 17480 Mad

                                                                                 Arb.O.P. No.583 of 2022

                                      IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                        DATED: 10.11.2022

                                                            CORAM

                              THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY

                                            Arb.O.P.(Comm.Div.) No.583 of 2022
                                                           &
                                                O.A.Nos.657 to 659 of 2022

                             1. S.Sudhakar
                             2. S.Dhinakar
                             3. Shri Lakshmi Agro Foods
                                No.9, N.N.Garden,
                                10th Street, Chennai-600 021
                                Rep.by its Partner
                                S.Sudhakar                               ... Petitioners/Applicants


                                                               vs.

                             S.Giridharan                               ... Respondent/Respondent

                             PRAYER: Arbitration Original Petition filed under Section 11(5)
                             read with Sections 10(2) and 12(1)(b) of the Arbitration and
                             Conciliation Act, 1996 pleased to appoint a Sole Arbitrator for the
                             purposes of adjudication upon all differences and disputes that have
                             arisen between the parties under the Re-constitution of Partnership
                             dated 04.01.2001, and pass such further or other others as this Hon'ble
                             Court may deem fit and proper in the facts and circumstances of the
                             case and render justice.


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                                                                                    Arb.O.P. No.583 of 2022

                                            For Petitioners     : Mr.Madhan Babu for
                                                                  M/s.R.Parthasarathy

                                            For Respondent      : Mr.K.P.Sathish Kumar
                                                                  for M/s.P.Raja
                                                              **********

Two partners and a partnership firm have jointly filed this

petition under Section 11 of the Arbitration and Conciliation Act

1996 (the Arbitration Act) and three applications under Section 9

thereof. For ease of reference, the parties are referred to in this order

as per their status in the Section 11 petition.

2. The petitioners state that a partnership firm under the name

and style of “Shri Laxmi Agro Foods” was constituted. The said firm

is engaged in the business of trading in food products such as pulses.

The petitioners assert that the partnership firm was re-constituted

upon the retirement of Mr.L.Senthivelan and Mr.L.Arun Kumar and

that a Deed of Re-constitution of Partnership (the Deed) was executed

on 04.06.2001. According to the petitioners, the Deed was executed

by the two petitioners, Mr.K.Selvaraj, who is their late father, and the

respondent herein. In terms thereof, it is stated that the respondent

herein acknowledged the receipt of a sum of Rs.25,00,000/- in full

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and final settlement of all claims in relation to the partnership firm.

The petitioners rely upon clause 19 of the said deed, which provides

for dispute resolution by arbitration.

3. Learned counsel for the petitioners points out that clause 19

names an arbitrator. However, by referring to a communication dated

14.09.2022 from the named arbitrator, it is stated that the named

arbitrator would be ineligible in terms of Section 12(5) read with

Schedule 7 of the Arbitration Act.

4. Learned counsel also points out that the respondent herein

instituted a civil suit before the commercial court at Chennai seeking

relief in relation to a specific trade mark. The said suit was rejected

for want of jurisdiction.

5. Learned counsel further submits that the petition is filed

under Section 11(6) of the Arbitration Act and that, therefore, the 30

day period prescribed under Section 11(4) thereof does not apply.

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6. As regards the applications under Section 9, by drawing

reference to a message sent by the respondent and a letter addressed to

a prospective business partner of the petitioners, it is stated that the

respondent is communicating with such persons to cause prejudice to

the business of the partnership firm, in spite of exiting from the firm.

Therefore, he submits that interim orders be granted to restrain such

interference pending arbitral proceedings.

7. The petition and applications are strongly opposed by the

respondent. The first ground on which the petition is opposed is the

non-production of the original Deed. By drawing reference to Rule

3.1 of the Madras High Court (Arbitration) Rules 2020, it is stated

that the production of the original or a duly certified copy is

mandatory. The next ground on which the petition is opposed is that

the Deed, which is the document containing the arbitration clause, is

not valid. Learned counsel points out that the said document does not

bear the signature of the party of the second part, the late Mr.Selvaraj.

Learned counsel also asserts that the signature of the respondent on

the said document is denied. The third objection is on the ground that

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the arbitration clause names an arbitrator. Therefore, it is stated that

the dispute should be referred to the named arbitrator and not to any

other person. This submission is made without prejudice to the

contention that the agreement is not valid. The fourth objection is on

the ground that the petitioners approached this Court prior to the

expiry of the 30 day notice period under Section 11 of the Arbitration

Act.

8. As regards the Section 9 applications, it is stated that the

petitioners have not produced a valid partnership deed. They have

also not produced records relating to the GST registration of the

partnership firm. In the absence of such documents, it is stated that

the applications for interim relief should be rejected.

9. A photocopy of the Deed is on record. While learned counsel

for the petitioners asserts that the petitioners are in possession of the

original, the original is not before this Court. The production of the

original is not mandatory for a petition under Section 11 of the

Arbitration Act as per Rule 3 of the Madras High Court (Arbitration)

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Rules, 2020. Even as regards a Section 9 application, a copy certified

by the party or his representative is sufficient. The photocopy

produced before this Court appears to bear a blurred signature, as

regards the party of the second part on a few pages, but the signature

of the party of the second part is clearly not visible on the last page of

the document. Although the respondent denies his signature, the Deed

bears a signature which appears prima facie to be that of the

respondent on all pages thereof.

10. Clause 19 of this Deed provides for resolution of disputes

by arbitration. The said clause is set out below:

“19. In the event of disputes or differences amongst any of the Parties hereto in relation to the terms and conditions stipulated under this agreement, the same shall be resolved by reference of the dispute to Mr.V.Mahesh, Chartered Accountant who shall act as the Sole Arbitrator. The Parties hereto shall be governed by the law relating to Arbitration in force on that date.”

11. The question that arises for consideration is whether the

petitioners have made out a case for reference of the dispute for

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arbitration notwithstanding the objections raised in relation to the

validity of the agreement containing the arbitration clause. By a legal

fiction, the Arbitration Act provides, in Section 16(1) thereof, that the

arbitration clause constitutes a distinct agreement which survives

notwithstanding conclusions that the contract containing such clause

is invalid. The request for constitution of the arbitral tribunal should

be viewed in that statutory context.

12. As noticed earlier, the Deed prima facie appears to bear the

signature of the respondent herein, who is described therein as a

confirming party. The respondent, however, disputes the signature on

the document. Learned counsel for the petitioners relied on an order

dated 11.12.2015 in V.S.Ravichandran and another v. G.Ramesh and

others in O.P.No.793 of 2015. In the said order, notwithstanding

objections with regard to the validity of the partnership deed

containing the arbitration clause, the dispute was referred for

arbitration subject to the examination of the validity of the partnership

deed by the arbitral tribunal, including by subjecting the same to

forensic examination. Learned counsel also placed for consideration

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the recent judgment of the Hon'ble Supreme Court in Emaar India

Ltd. v. Tarun Aggarwal Projects LLP and another, 2022 SCC Online

SC 1328, particularly paragraph 23 thereof, with regard to the limited

scope of Section 11 and the circumstances under which a petition

under Section 11 may be rejected. He also placed for consideration

Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra and another, (2012)

2 SCC 144, particularly paragraphs 16 and 17 thereof, with regard to

the need to be wary of attempts to derail such proceedings by raising

objections with regard to the validity of the agreement.

13. As regards the objection on the ground that there is a named

arbitrator, the named arbitrator has stated as under in the

communication dated 14.09.2022:

“Hence it is proved beyond doubt that Mr.S.Giridharan has no affairs in the aforesaid partnership firm directly / indirectly as per partnership Reconstitution Deed dated 04.06.2001. Furthermore, he and his wife/son/his assignor/friends etc have no rights over the fixed assets/movable assets/tangible assets/intangible assets (Trademark

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“Udhayam”), loans secured /unsecured/etc. As a result the outgoing partner Shri S.Giridharan and others who had retired from the aforesaid partnership firm had assigned the rights of the intangible assets (UDHAYAM) to the remaining partners. This is treated as an Assignment Deed. There are various judgments given by Honorable Apex Court of India in favour of remaining partners.”

14. In light of the above categorical opinion expressed by the

named arbitrator in favour of the petitioners, the named arbitrator is

clearly ineligible to act as arbitrator as per Section 12(5) read with

Schedule 7 of the Arbitration Act. Therefore, the dispute cannot be

referred to the named arbitrator.

15. The last objection relating to the 30 day notice period

remains to be considered. In this case, the arbitration clause provides

for the reference of disputes to the named arbitrator. The named

arbitrator has not failed to act but is de jure unable to act. In the

circumstances, it would be a meaningless ritual to call upon him to act

as per clause 19 of the Deed. The situation does not fit neatly into

sub-sections 4, 5 and 6 of the Arbitration Act. Significantly, the https://www.mhc.tn.gov.in/judis 9 / 12 Arb.O.P. No.583 of 2022

respondent denies the validity of the Deed and, consequently, the

arbitration clause. In these circumstances, the objection regarding the

failure to wait until expiry of the 30 day period is liable to be

overruled.

16. When the law on Section 11 is considered in the

factual context, the petitioners have made out a case for reference of

the dispute for arbitration subject to the consideration of the

objections of the respondent with regard to the validity of the Deed,

including by reference thereof for forensic examination if considered

appropriate by the arbitral tribunal.

17. In these circumstances, this petition is allowed by

appointing Mr.Justice K.N.Basha, a retired Judge of this Court,

residing at Flat No.F-1, ''STAR'', No.25/1, Dr.Ambedkar Road, Old

ICF Link road, North Thirumalai Nagar, Villivakkam, Chennai-600

049, Mobile No.:9444454545, as the sole arbitrator. The sole

arbitrator is requested to enter upon reference and adjudicate the

dispute, including all objections raised by either party. The fees and

expenses in relation to the arbitral proceedings shall be fixed by the

arbitrator in consultation with the parties.

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18. As regards the applications for interim relief, such relief is

prayed for primarily on the ground that the respondent is interfering

with the conduct of the business of the partnership firm. Without

doubt, the respondent has a right to initiate appropriate legal

proceedings to redress any grievances. Without prejudice to such

right, the respondent is restrained from interfering with the business

by communicating with business partners, competitors or the like in

relation to the business of the partnership firm for a period of three

weeks after the arbitral tribunal enters upon reference. Meanwhile, it

is open to the applicants to file petitions under Section 17 of the

Arbitration Act seeking similar relief from the arbitral tribunal. All

the applications are disposed of on these terms.

10.11.2022

Index : Yes/No Internet : Yes/No kal/rrg

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SENTHILKUMAR RAMAMOORTHY J.

kal/rrg

Arb.O.P.(Comm.Div.) No.583 of 2022 & O.A.Nos.657 to 659 of 2022

10.11.2022

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