ARBAP/56/2022
2023 Latest Caselaw 1157 UK

       IN THE HIGH COURT OF UTTARAKHAND
                  AT NAINITAL

                       SRI JUSTICE VIPIN SANGHI, C.J.

                              27TH APRIL, 2023
        ARBITRATION PETITION NO. 56 OF 2022
Between:
Shri Jagdish Bhatia              ...................Applicant

and

Smt. Parvati Devi and others.                               ....Respondents


Counsel for the applicant          :   Mr. Ramji Srivastava and Mr. Nikhil
                                       Singhal.

Counsel for the respondents        :   Mr. Neeraj Garg, learned counsel for
                                       respondent Nos. 2, 4, 5, 6, 7, 8, 9 and
                                       15.
                                       Mr. Piyush Garg, learned counsel for
                                       respondent Nos. 3, 10, 11, 12, 13 and
                                       14.




Upon hearing the learned Counsel, the Court made the
following

JUDGMENT :

The applicant has preferred the present

Application under Section 11(6) of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as the 'Act')

to seek appointment of an Arbitrator to adjudicate the

disputes between the parties.

2. The case of the applicant is that the applicant

entered into a partnership deed dated 01.10.1981 to carry

on the business under the name and style of "M/s Bhatia

Enterprises", along with several other partners. He further

states that the said Firm was reconstituted on 01.11.1999 upon retirement of one of the partners, namely Sri Suraj

Prakash Bhatia. The applicant states that upon

reconstitution, there were several partners in the

partnership firm, wherein the applicant has 4% share. The

applicant narrates that the records of the Firm were being

maintained by Sri Kishan Lal Bhatia. Upon his demise, the

records were taken into custody by respondent No. 5-Sri

Chander Prakash Bhatia. He further states that upon

demise of the existing partners, their legal representatives

became partners of the Firm. The applicant narrates that

several proceedings under Section 9 of the Act were initiated

by one or the other parties. He further states that in the

year 2019, it was decided between the partners of the Firm

and their heirs that the construction standing over the

property of the Firm be demolished and the property be

divided as per the percentage of the shares. The applicant

has placed on record the Agreement executed between the

parties in that regard.

3. In Paragraph-12 of the Application, it is stated

that dissolution of the Firm has not taken place. He further

states that Sri Jitendra Bhatia has not made available the

Books of Account for inspection, despite the applicant's

demands. He further states that the applicant's demand for

partition of the property in respective shares was not agreed

to by the respondents. It is further claimed that respondent

No. 5 has sought to deal with the property of the

partnership firm in September, 2021. Clause 27 of the

Partnership Deed contains the Arbitration Agreement. The

applicant states that disputes and differences have arisen

between the parties under the Partnership Deed, which need

to be resolved through arbitration.

4. Notices have been exchanged between the

parties, which have been referred to in the Application.

5. Upon filing of this Application, notices were issued

to the respondents. A reply has been filed on behalf of

respondent No. 4; a composite reply has been filed on

behalf of respondent Nos. 5, 6, 7, 8, 9 & 15, and; another

reply has been filed on behalf of respondent Nos. 3, 10, 11,

12, 13 & 14.

6. The stand taken by the respondents is that the

aforesaid Partnership Firm stood dissolved in the year 2011

with the issuance of a notice for dissolution which was

issued by Sri Jeet Ram Bhatia, one of the partners of the

Firm, on 21.01.2011. In the said notice, which was

addressed to the existing partners, including the applicant

Sri Jagdish Chand Bhatia, Sri Jeet Ram Bhatia expressly

conveyed his intention of dissolving the Firm w.e.f

21.01.2011. He also stated that "You are aware that the

business of the firm stands closed w.e.f. 20.01.2011."

7. The applicant responded to the said notice,

through registered AD post, and the response of the

applicant-Jagdish Chand Bhatia has also ben placed on

record, which reads as follows:-

"To, Shri Jeet Ram Bhatia, S/o Late Shri Rikhi Ram Bhatia, R/o 124/5, Rajendra Nagar, Street No. 4, Kaulagarh Road, Dehradun.

Sir, Kindly refer to your letter dated 21/01/2011. In context of the above notice we have to state the following facts: -

1. That your letter is without any basis and is an attempt on your part to avoid payment of legitimate dues to us. You are withholding the accounts and funds of the firm.

2. That the letter has been issued by you only to evade payment of the legitimate dues of the partners and to coerce us to forego our rights.

3. I have also learnt that you have filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the court of learned District Judge, Dehradun. Since the matter is subjudice before the learned court we reserve our right to file a detailed reply in the learned court. However, in the meantime you are requested to pay the entire amount due to us and give us the complete accounts of the firm which have been withheld by you.

Yours sincerely, (Shri Jagdish Chand,) S/o Late Shri Rikhi Ram Bhatia, 609, Rajendra Nagar, Street No. 4, Kaulagarh Road, Dehradun.

8. The case of the respondent is that the applicant,

therefore, acknowledged the receipt of the dissolution

notice, and therefore, cannot run away from the same.

Since the partnership was "at Will", the same could be

dissolved by any of the partners at any time, and it stood

dissolved with the issuance of the notice of dissolution dated

21.01.2011.

9. The submission of learned counsel for the

respondents is that no returns of the Firm were filed after

2011, since no partnership business was carried on

thereafter. In this regard, the Certificate issued by the

Chartered Accountant of the firm "M/s A.K. Kashyap & Co.

37/1 Rajpur Road, Dehradun" has been tendered in Court,

which states that "On the basis of verification done at

Income Tax Website, we confirm that M/s Bhatia

Enterprises, Chakrata Road, Dehradun, having its PAN:

AAFFB6940F filed its last Income Tax Return for the F.Y.

2009-10 (AY 2010-11) on 15.03.2011. We have been

explained that since there was no business conducted after

that hence no return of income was filed after that period."

10. Further submission of the learned counsel for the

respondents is that in 2019, the parties decided that the

property, which was earlier held by the Firm, and which was

now owned by the erstwhile partners, and their heirs, in

their respective shares, be demolished. Accordingly, the

parties entered into an Agreement between themselves for

demolition of the existing constructed property and

distribution of the proceeds of the sale of the debris in

accordance with their respective shares. This Agreement has

been placed on record by the applicant himself. It is pointed

out that in terms of the Agreement, the applicant accepted

Rs. 32,000 + Rs. 24,000/-, total Rs. 56,000/- towards his

4% share in the debris of the constructed property.

11. It is argued that this Agreement, firstly, does not

purport to be amongst the parties in their capacity as

partners of the said firm, and, secondly, does not contain

any arbitration clause, and the disputes arising under the

said Agreement are not referable to arbitration.

12. Learned counsel for the respondents have argued

that any claim arising in the partnership deed is clearly

barred by limitation, inasmuch, as, dissolution of the firm

took place on 21.01.2011, whereas the Arbitration

Application has been filed in 2022. The period of limitation

prescribed for claiming accounts and shares of the profits of

a dissolved partnership is three years, and the time from

which the period begins to run, is the date of dissolution of

the firm, as is evident from Entry-5 of the Schedule to the

Limitation Act, 1963.

13. Learned counsel for the respondents have also

placed reliance on a recent judgment of the Supreme Court

in NTPC Ltd. vs.M/s SPML Infra Ltd. (Civil Appeal No.

4778 of 2022, decided on 10th April, 2023) dealing with

the scope of enquiry that the Court should undertake while

dealing with an application under Section 11(6) of the

Arbitration and Conciliation Act, 1996. Relevant paragraphs

of the said judgment read as follows:-

"28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd.

46. We will now examine whether the allegations of coercion and economic duress in the execution of the Settlement Agreement are bona fide or not. This inquiry has a direct bearing on the arbitrability of the dispute. It was during the subsistence of the Writ Petition and the High Court's interim order, when SPML had complete protection of the Court, that the parties entered into the Settlement Agreement. This agreement was comprehensive. It inter alia provided for (i) the release of Bank Guarantees by NTPC, (ii) the withdrawal of SPML's Writ Petition, (iii) restraining NTPC from filing contempt proceedings against SPML for letting the Bank Guarantees expire, and finally, (iv) restraining SPML from initiating any proceedings under

the subject contract, including arbitration. The Settlement Agreement also recorded that there were no subsisting issues pending between the parties.

48. The foregoing clarifies beyond doubt that the claims sought to be submitted to arbitration were raised as an afterthought. Further, SPML's allegations of coercion and economic duress in the execution of the Settlement Agreement lack bona fide. They are liable to be knocked down as ex facie frivolous and untenable.

49. In view of the above-referred facts, which speak for themselves, we are of the opinion that this is a case where the High Court should have exercised the prima facie test to screen and strike down the ex-facie meritless and dishonest litigation. These are the kinds of cases where the High Court should exercise the restricted and limited review to check and protect parties from being forced to arbitrate."

14. I have considered the rival submissions of learned

counsels and perused the records. It is evident that any

claim arising out of the partnership deed is clearly barred by

limitation, inasmuch as the partnership deed, which was "at

will", stood dissolved on 21.01.2011 on account of the

issuance of the notice of dissolution of erstwhile partner Sri

Jeet Ram Bhatia. The applicant himself acknowledged

receipt of the said notice of dissolution by replying to it, and

therefore, cannot be heard to say that the partnership firm

has not been dissolved. The right of the applicant to claim

accounts and shares in the profit of the Firm accrued on the

date of dissolution, and should have been invoked within the

period of limitation of three years, which expired on

20.01.2014. Admittedly, no notice invoking the arbitration

was issued by the applicant before 20.01.2014. The notice

invoking the arbitration has been issued by the applicant

only on 18.07.2022, which is clearly beyond the period of

limitation.

15. So far as the Agreement entered into between the

parties on 10.01.2019 is concerned, the said Agreement is

distinct from the partnership deed, which does not survive

after 21.01.2011, and the said Agreement dated 10.01.2019

does not contain any Arbitration Agreement. It is an

agreement between individuals in their individual capacity. A

perusal of the Agreement entered into between the parties

on 10.01.2019 shows that the parties have entered into the

said Agreement in their own right, and as co-owner of the

joint property. It is open to them to have their inter se

disputes in relation to the joint property resolved in civil

proceedings. Consequently, any dispute arising under the

said Agreement cannot be referred to Arbitration.

16. In the light of the aforesaid, and while being

conscious of the decision of the Supreme Court in NTPC

Ltd. vs. M/s SPML Infra Ltd. (supra), I am not inclined to

allow this Application. The same is, accordingly, dismissed.

________________ VIPIN SANGHI, C.J.

Dt: 27th April, 2023 Rathour