Madras High Court

S. Palaniappan vs R. Ganesan on 8 September, 2023

ARB.O.P.(Com.Div) No.259 of 2023

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 08.09.2023

CORAM:

THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE

Arb.O.P.(Com.Div) No.259 of 2023

1.S. Palaniappan
2.S. Eswaran
3.P. Jagatheesan
4.K. Madhesawaran
5.S. Nagarani
6.K. Sathya
7.K. Gomathi ... Petitioners

Vs.

R. Ganesan ... Respondent

Prayer : Arbitration Original Petition (Commercial Division) filed under
Section 11(6) of the Arbitration and Conciliation Act, 1996, praying to appoint
a Sole Arbitrator to adjudicate upon the disputes arisen between the petitioners
and the respondent under the Partnership Agreement dated 11.02.2014.

For Petitioners : Mr.K.M. Arun

For Respondent : Mr.G. Mohan

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ARB.O.P.(Com.Div) No.259 of 2023

ORDER

This petition has been filed under Section 11(6) of the Arbitration and

Conciliation Act (hereinafter referred to as 'the Act'), seeking for appointment

of an Arbitrator by this Court.

2. The petitioners claim that the respondent and the petitioners have

entered into a Partnership Agreement dated 11.02.2014. The petitioners have

raised a dispute against the respondent arising out of the said Agreement.

There is an arbitration clause available in the Partnership Agreement dated

11.02.2014, which is extracted hereunder:-

“16) ARBITRATION:

That if any dispute or difference of opinion arises among the partners, the arbitrators, who are appointed by the partners, shall settle the same and their award is final.”

3. The petitioners have also invoked arbitration in accordance with the

aforementioned arbitration clause by issuing notice to the respondent on

23.02.2023. The arbitration invocation notice dated 23.02.2023 has been https://www.mhc.tn.gov.in/judis

ARB.O.P.(Com.Div) No.259 of 2023

returned by the respondent with an endorsement 'refused'. Since there is no

consensus between the parties to the dispute with regard to the name of the

Arbitrator, the present petition has been filed.

4. A counter-affidavit has been filed by the respondent denying the

contentions of the petitioners. According to the respondent, he never entered

into any Partnership Agreement dated 11.02.2014 with the petitioners. He has

contended that the petitioners have committed fraud by fabricating a

Partnership Agreement dated 11.02.2014, as if the respondent is a partner in

the partnership business. The partnership business pertains to the

transportation contract for transporting liquor from TASMAC Depot.

5. Earlier, the respondent had filed a Writ Petition in WP.No.7520 of

2017 before this Court, pertaining to the very same partnership business of

transporting liquor from TASMAC Depot. As seen from the counter-affidavit

filed by the respondent, the petitioners were arrayed as party respondents,

though pursuant to the directions given by the Writ Court. Even in the Writ

Petition, the petitioners in this Arbitration OP had contended that there is a

Partnership Agreement dated 11.02.2014 between the petitioners and the

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ARB.O.P.(Com.Div) No.259 of 2023

respondent. After recording that there is no dispute between the partners, the

respondent in this Arbitration OP was directed to produce all the documents

before the respondents 1 and 2 therein, within a period of two weeks from the

date of receipt of a copy of that order. On receipt of the said documents, the

Regional Manager (SG), Tamil Nadu State Marketing Corporation Limited

(TASMAC) was directed to issue notice to the concerned parties including the

partners of the Firm and conduct inquiry and pass orders on merits and in

accordance with law, within a period of six weeks thereafter.

6. While deciding the application under Section 11 of the Act, this Court

will have to take a prima facie view, as to whether there exists an arbitration

clause or not in the subject matter of the contract. Even though the respondent

contends that the petitioners have committed fraud against him and have

fabricated a Partnership Agreement dated 11.02.2014 as if the respondent is a

partner, there is no conclusive evidence to show that the petitioners have

fabricated the Partnership Agreement dated 11.02.2014, which is the subject

matter of dispute in this Arbitration OP.

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7. The documents filed by the respondent along with the counter-

affidavit in this Original Petition, are all self-serving documents. There is no

order passed by any Statutory Authority or by a Court of law, to prove that the

Partnership Agreement dated 11.02.2014 which is the subject matter of

dispute, is a fabricated document.

8. The learned counsel for the respondent had relied upon a judgment of

the Hon'ble Supreme Court in the case of 'A. Ayyasamy Vs. A. Paramasivam

& others' reported in '(2016) 10 SCC 386', to substantiate his contention that

whenever serious allegations of fraud are made, the dispute is not an arbitrable

dispute. However, as seen from the said judgment, it has been made clear that

mere allegation of fraud in the pleadings by one party against the other, cannot

be a ground to hold that the matter is incapable of settlement by Arbitrator and

should be decided by the Civil Court.

9. As observed earlier, in the case on hand, there is no conclusive

evidence to prove that the Partnership Agreement dated 11.02.2014 which is

the subject matter of dispute, is a fabricated document and fraud has been

committed by the petitioners. As observed earlier, while deciding an

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ARB.O.P.(Com.Div) No.259 of 2023

application under Section 11 of the Act, this Court will have to take only a

prima facie view, as to whether, there exists an arbitration clause or not.

Being a dispute arising out of a Partnership Agreement dated 11.02.2014, the

said dispute is certainly an arbitrable dispute. Though serious allegations of

fraud have been levelled by the respondent against the petitioners as seen from

the respondent's counter-affidavit, since there is no conclusive evidence to

substantiate the said contentions, this Court while deciding an application

under Section 11 of the Act, cannot adjudicate on the said contentions. It is

only for the Arbitrator to adjudicate on the said contentions based on the oral

and documentary evidence produced by the respondent before the Arbitrator

appointed by this Court.

10. As seen from the respondent's own pleadings, the petitioners were

arrayed as party respondents in a Writ Petition filed by the respondent

pertaining to the transportation contract with M/s.TASMAC. The respondent

may contend that only on the directions of the Writ Court, the respondent had

impleaded the petitioners in the said Writ Petition. Having made the

petitioners as party respondents in the Writ Petition pertaining to the

transportation contract with TASMAC, which is indirectly connected to the

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ARB.O.P.(Com.Div) No.259 of 2023

present dispute between the parties arising out the Partnership Agreement

dated 11.02.2014, this Court cannot come to the definite conclusion that the

petitioners had committed fraud against the respondent and that they have also

fabricated the Partnership Agreement dated 11.02.2014. It is only for the

Arbitrator to adjudicate on the respondent's contention as to whether the

petitioners have committed fraud or not.

11. The respondent is also having the right to file an application under

Section 16 of the Act, questioning the jurisdiction of the Arbitrator to

adjudicate the dispute. The respondent has got the right even to question the

existence of the valid Arbitration Agreement between the parties under Section

16 of the Act.

12. While that be so, this Court, while exercising its powers under

Section 11 of the Arbitration and Conciliation Act, 1996, has to only see, as to

whether on a prima facie case, there is an arbitration clause or not, in the

subject matter of dispute namely the Partnership Agreement dated 11.02.2014.

As extracted supra, the Partnership Agreement dated 11.02.2014, contains an

arbitration clause. Though the respondent may dispute the same, this Court is

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of the considered view that since there is no conclusive evidence to prove the

respondent's contention, necessarily, this Court will have to appoint an

Arbitrator in terms of the arbitration clause contained in the Partnership

Agreement dated 11.02.2014.

13. For the foregoing reasons, this Arbitration Original Petition is

allowed as prayed for, by issuing the following directions:-

(a) This Court appoints Mr.D. Saravanan, Advocate, having Office

at New No.9, Old No.5/1, Canal Bank Road, Kasthuribai

Nagar, Adyar, Chennai – 600 020, Mobile No.:9840044177, as

the Sole Arbitrator to adjudicate the dispute between the

petitioners and the respondent arising out of the Partnership

Agreement dated 11.02.2014, on merits and in accordance with

law.