Punjab-Haryana High Court
Rajinder Prasad Goyal vs Royal Orchid Company And Others on 8 October, 2010
Author: Alok Singh
Bench: Alok Singh
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Civil Revision No. 724 of 2010
Date of Decision: October 08, 2010
Rajinder Prasad Goyal
...Petitioner
Versus
Royal Orchid Company and others
... Respondents
CORAM: HON'BLE MR. JUSTICE ALOK SINGH
1. Whether reporters of local news papers may be
Allowed to see judgment?
2. To be referred to reporters or not?
3. Whether the judgment should be reported in the Digest?
Present: Mr. P.S. Rana, Advocate
for the petitioner.
Mr. Lalit Garg, Advocate,
for respondent Nos. 1 to 3.
Mr. D.K. Singhal, Advocate,
for respondent No.6.
Alok Singh, J.
Present petition is filed assailing the order dated 23.09.2009 passed by learned Civil Judge (Junior Division), Rajpura, whereby the application moved by the defendant No.1 - petitioner herein seeking rejection of the C.R.No. 724 of 2010 2 plaint in view of Sections 5 and 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) was rejected.
The brief facts of the present case are that plaintiffs - respondents herein filed suit for rendition of accounts by dissolution of partnership, contending therein that partnership deed was executed between the parties to the suit on 08.08.2008 to carry the business of sale and purchase of sick units dealing in scrap and machinery, commission agents, builders and land developers. It has further been contended that as per the partnership deed, plaintiffs' share would be 25% each and share of defendant no.1 would be 50% in the profit and loss account of the business. It has further been asserted in the plaint that defendant no.1 is not permitting the plaintiffs to participate in the business and is not rendering any account of the firm and has denied the plaintiffs to participate in the business, and refused to give the share of the profits of the firm.
On the first date of hearing, defendant no.1 - petitioner herein moved an application under Order 7 Rule 11(a) and (b) of C.P.C. for rejection of plaint, inter-alia, contended therein that partnership deed contains arbitration clause and any dispute arising out of the C.R.No. 724 of 2010 3 partnership deed is to be settled by the arbitration only. It has further been averted that since controversy arising out of the partnership can be settled only by the arbitration in view of clause 19 of the partnership deed, present suit is not maintainable in view of Sections 5 and 8 of the Act.
Learned Trial Court vide impugned order has held that suit for dissolution of partnership and rendition of account has to be adjudicated upon by the Civil Court only and not by arbitration. Learned Trial Court vide impugned order, rejected the application moved by defendant no.1 - petitioner herein.
I have heard learned counsel for the parties and perused the record.
Undisputedly, partnership deed is placed on record by the plaintiffs and in paragraph no.1 of the plaint, plaintiffs have admitted execution and existence of partnership deed dated 08.08.2008. Clause 19 of the partnership deed reads as under:-
"That in case of any controversy arising out of this deed relating to this contract or breach thereof, the same shall be settled by arbitration as provided in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and the award shall be C.R.No. 724 of 2010 4 binding on all the partners and their legal representatives and nominees."
Hon'ble Apex Court in the matter of V.H. Patel & Company and others vs. Hirubhai Himabhai Patel and others reported in (2000) 4 Supreme Court Cases 368, in paragraph no.11 and 12 has held as under:-
"11. A contention had been raised before us that the arbitrator has no power to dissolve a partnership firm, especially on the ground that such dissolution is based on a ground or any other ground which renders it just and equitable to dissolve and that is the power of the court. It was pointed out that mere strained relationship between the partners would not be enough to dissolve a partnership. It is not necessary for us to examine this contention in this case when the partners sought for dissolution of the partnership on various grounds enumerated in Section 44(c) to (f) may also be sufficient and may not be necessary to invoke the inherent jurisdiction of a court such as dissolution is just and equitable. If there has been breach of agreement and conduct is destructive of mutual confidence certainly such conduct can give rise to a ground for dissolution of the partnership. C.R.No. 724 of 2010 5 While mere disagreement or quarrel arising from impropriety of partners is not sufficient ground for dissolution, interference should not be refused where it is shown to the satisfaction of the adjudicating authority that the conduct of a partner has been such that it is not reasonably practicable for other partners to carry on the business in partnership. For instance, dissolution should be ordered if it is shown that the conduct of a partner has resulted in destruction of mutual trust or confidence which is the very basis for proper conduct of partnership. It is not necessary for us to go into or seek for an explanation of the reasons which may have induced the disputes between the partners. Dissolution will arise where it appears that the state of feelings and conduct of the partners have been such that business cannot be continued with advantage to either party.
12. So far as the power of the arbitrator to dissolve the partnership is concerned, the law is clear that where there is a clause in the Articles of Partnership or agreement or order referring all the matters in difference between the partners to C.R.No. 724 of 2010 6 arbitration, arbitrator has power to decide whether or not the partnership shall be dissolved and to award its dissolution. [See: Phoenix v. Pope & Ors., (1974) 1 All E.R. 512]. Power of the arbitrator will primarily depend upon the arbitration clause and the reference made by the court to it. If under the terms of the reference all disputes and difference arising between the parties have been referred to arbitration, the arbitrator will, in general, be able to deal with all matters, including dissolution. There is no principle of law or any provision which bars an arbitrator to examine such a question. Although the learned counsel for the petitioner relied upon a passage of Pollock & Mulla, quoted earlier, that passage is only confined to the inherent powers of the court as to whether dissolution of partnership is just and equitable, but we have demonstrated in the course of our order that it is permissible for the court to refer to arbitration a dispute in relation to dissolution as well on grounds such as destruction of mutual trust and confidence between the partners which is the foundation therefor."C.R.No. 724 of 2010 7
Hon'ble Apex Court in the matter of Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway Petroleums, reported in (2003) 6 SCC 503, in paragraph no.14 has observed as under:-
"If in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below. Therefore, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration."
As per the dictum of Apex Court, the dispute regarding the dissolution of partnership and rendition of account shall be referred for arbitration in view of the arbitration clause.
In the opinion of this Court, if there has been any breach of agreement and conduct is destructive of mutual confidence certainly such conduct can give rise to a ground for dissolution of the partnership. This Court is of the view that arbitrator is competent to decide whether or not the partnership should be dissolved and to award its dissolution. Arbitration can also look into the accounts to C.R.No. 724 of 2010 8 find out the liabilities inter-se the partners. Since, in the present case, all the disputes between the partners were agreed to be settled through arbitration, hence, in the opinion of this Court, learned Trial Court ought to have exercised jurisdiction under Section 8 of the Act. Moreover, in the plaint, plaintiffs are alleging misconduct and breach of mutual confidence give rise to a ground for dissolution of partnership, hence, ratio of the judgment of the Apex Court in the matter of V.H. Patel (supra) is applicable in the present case. In the opinion of this Court, no complicated questions of facts or law are involved justifying refusal to arbitration.
Petition is allowed. Order impugned is quashed. It is directed that dispute between the parties shall be settled through arbitration as per clause 19 of the partnership deed.
October 08, 2010 ( Alok Singh ) vkd Judge