Gujarat High Court
Kirtikumar Fakrichand Mehta vs Dilipkumar Jayantilal on 14 June, 2013
Author: G.B.Shah
Bench: G.B.Shah
KIRTIKUMAR FAKRICHAND MEHTAV/SDILIPKUMAR JAYANTILAL SANGHVI-HUF THRO KARTA DILIPKUMAR C/SCA/1971/2013 CAV JUDGEMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 1973 of 2013 With SPECIAL CIVIL APPLICATION NO. 1971 of 2013 With SPECIAL CIVIL APPLICATION NO. 1885 of 2013 TO SPECIAL CIVIL APPLICATION NO. 1886 of 2013 With APPEAL FROM ORDER NO. 63 of 2013 with CIVIL APPLICATION NO. 1993 of 2013 with APPEAL FROM ORDER NO. 64 of 2013 with CIVIL APPLICATION NO. 1994 of 2013 with APPEAL FROM ORDER NO. 65 of 2013 with CIVIL APPLICATION NO. 1995 of 2013 with CIVIL APPLICATION NO. 3878 of 2013 in APPEAL FROM ORDER NO. 63 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE G.B.SHAH =========================================1
Whether Reporters of Local Papers may be allowed to see the judgment ?
2To be referred to the Reporter or not ?
3Whether their Lordships wish to see the fair copy of the judgment ?
4Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5Whether it is to be circulated to the civil judge ?
================================================================ KIRTIKUMAR FAKRICHAND MEHTA & 3....Petitioner(s) Versus DILIPKUMAR JAYANTILAL SANGHVI-HUF THRO KARTA DILIPKUMAR & 4....Respondent(s) ================================================================ Appearance:
Mr Mihir J. Thakore with Mr Devan Parikh, senior Advocates with Mr Prabhav Mehta, Advocate for the Petitioner(s)-Appellants/Applicants No. 1 - 4 Mr Kamal B Trivedi with Mr R.J. Oza, Senior Advocates with Mr Sanjay Mehta, Mr U.D. Shukla, Ms. Mini Pillai, Mr Bomi H Shethna and Mr Anal S.Shah, Advocates for Respondent(s)/Opponents ================================================================ CORAM:
HONOURABLE MR.JUSTICE G.B.SHAH Date :14/06/2013 CAV (COMMON) JUDGEMENT
1. These Special Civil Applications are filed by the petitioners/original plaintiffs challenging an order dated 30.1.2013 passed below Exhs. 18 and 21 in Civil Suit No. 2813 of 2012 and in Civil Suit No. 2814 of 2012 and Exhs 17 and 20 in Civil Suit No. 2815 of 2012 by learned Chamber Judge, City Civil Court, Ahmedabad, being illegal, arbitrary, contrary to the provisions of Partnership Act, more particularly section 43 of the Partnership Act and beyond the scope of Clause No.17 of arbitration contained in agreement of partnership dated 27.7.1999 which is in fact Partnership at Will as per clause 9 of the said agreement of partnership and hence praying to quash and set aside the order dated 30.1.2013 as stated above.
1.1 The appellants-petitioners/original plaintiffs being aggrieved by and dissatisfied with the judgment and order passed below Exhs. 6 and 7 dated 30.1.2013 respectively in above referred Civil Suits have also preferred the above referred Appeal from Orders with the contention that the said orders are unjust, illegal and not tenable at law.
1.2 Civil Applications No.1993 to 1995 of 2013 have been filed for staying implementation, execution and operation of the order dated 30.1.2013 passed by the learned Chamber Judge, City Civil Court, Ahmedabad below Exhs. 6 and 7 in Civil Suit No. 2813/2012. Civil Application No. 3878 of 2013 is filed to pass appropriate orders to punish the respondents herein for deliberate breach committed by the respondents of order dated 21.2.2013 passed by this court in Appeal from Order No.63 of 2013 and other group of matters whereby the interim relief granted by the trial court was extended.
2. Petitioners No. 1 to 4-original plaintiffs No. 1 to 4 i.e. Mehta Group and respondents No. 1 to 4-original defendants No. 1 to 4 i.e. Sanghvi Group are the partners of the partnership firm dated 27.7.1999 named and styled as M/s. Flueteff Industries i.e. respondent No.5-original defendant No.5.
The copy of the said partnership deed dated 27.7.1999 is annexed and marked as Annexure-II. It is not in dispute that the said partnership firm dated 27.7.1999 was not registered before the Registrar of Firms under the provisions of the Indian Partnership Act. 1932. The terms and conditions of the partnership deed are not in disputes between the parties. It is an admitted fact that business in partnership has been carried on as per the terms and conditions of the said partnership deed dated 27.7.1999. During the course of their submissions made by the learned Senior Advocates for the respective parties, they have mainly placed reliance on Clauses No. 9, 12, 14 and 17 (which are in Gujarati language) of the Partnership Deed dated 27.7.1999 at Annexure-II. English translation of the said clauses No. 9, 12, 14 and 17 reads as under:
Clause No.9:
Said partnership has been executed for the time specified at will i.e. the partnership is at will.
10. ... ...
11. ... ...
12. If any partner is desirous of retiring, he may retire by giving two months advance notice to the rest of the partners after settling accounts relating to profit, loss as well as advances and debt and for the said reason, the said partnership shall not be deemed to have been dissolved, but the rest of the partners themselves or by inducting third parties as partners, can continue the said partnership firm.
13. ... ...
14. On cessation of this partnership, when any of the partners retire or when there is a change in the share of a partner as to profit and loss in the partnership firm, the partner thus retiring or the partner whose share thus decreases, shall have no right over the goodwill of the partnership firm and shall not be entitled to receive any consideration for the same.
15. ... ...
16. ... ...
17. If any dispute or difference arises amongst the partners with respect to partnership deed or the business of the partners or with respect to any matter relating to the partnership firm, the same should be resolved by arbitration and the judgment on arbitration shall be treated as final. The said judgment shall be acceptable and binding to all the parties to the partnership deed and their legal heirs and nobody shall take recourse to any court of law.
2.1. As the disputes arose between the parties and the petitioners-Mehta group gave notice dated 26.7.2012 to the respondents-Sanghvi group stating that the partnership is at will under clause 9 of the partnership deed and as the partnership is at will, the firm respondent No.5 defendant No.5 shall stand dissolved w.e.f. 27.8.2012. The respondents-Sanghvi group, despite the notice, continued business and, therefore, the petitioners filed Civil Suits referred above along with injunction applications for dissolution, settlement of accounts and other reliefs. Copies of the said notice dated 26.7.2012 and reply dated 24.8.2012 are annexed and marked as Annexure III colly.
2.2 Respondents-Sanghvi group filed application under section 8 of the Arbitration and Conciliation Act, 1996, praying inter alia for referring the parties to the present suits i.e. Civil Suits referred above to arbitration under clause 17 of the partnership deed as the subject matter of the said suit is subject of an arbitration agreement between the parties of the present suit.
3. The learned trial Judge has come to the conclusion that the present subject matter of dispute is covered under clause 17 of the partnership deed and further came to the conclusion that considering the ratio of judgment of the Hon ble Apex Court reported in Prabhu Shankar Jaiswal vs. Sheo Narain Jaiswal (1996) 11 SCC 225, though the partnership firm is not registered, the matter can be referred to the Arbitrator for dissolution, settlement of accounts and for enforcement of any rights or powers for obtaining properties of the dissolved firm. So far as the Notice of Motion Exh. 6 and injunction application Exh.7 are concerned, the trial court has come to the conclusion that as the matter is referred to Arbitrator, the said Hon ble Court has no jurisdiction to decide the Notice of Motion and hence, without going into the merits of the said Notice of Motion, the same was rejected by order dated 30.1.2013. Being aggrieved by and dissatisfied with the said orders, the petitioners/appellants-Mehta group have filed Special Civil Application No. 1973/2013 as well as Special Civil Applications No. 1971/2013, 1885/2013, 1886/2013 and also filed Appeal from Order Nos. 63, 64 and 65 of 2013. I have heard the learned Senior Advocates for the above referred Special Civil Applications as well as the Appeal from Orders and also the Civil Applications filed by the petitioners-Mehta group being Civil Applications No 1993 of 2013 to 1995 of 2013 and Civil Application No. 3878 of 2013.
4. Learned senior Advocates for the petitioners-Mehta Group has submitted that as such the trial court has not touched upon the contentions raised by the petitioners to the fact that as the partnership is at will and by Notice dated 26.7.2012 the firm is dissolved and so there is no valid arbitration agreement existing between the parties and, therefore, the matter cannot be referred to the arbitrator. Reliance is placed on the judgments of this Court reported in 2001 (4) GLR 3168 and also 2006 (3) GLR 2582 as has been mentioned by the learned trial Judge in para 6 of the impugned order passed below Exhs. 18 and 21.
4.1. On the point of the firm being a partnership at will , learned senior Advocate for the petitioners has placed reliance on the following decisions:
(i) Manibhai Shankerbhai Patel v. Swashray Construction Co. &Ors.
(1982 (1) GLR 312) (ii) Mohanlal Sajandas & Anr. v. Hareshkumar Narandas & Ors.(2001 (4) GLR 3168) (iii) Hemendra Babulal Shah HUF v. B.S. Shah (2006 (3) GLR 2582 (iv) Rameshchand Ranchhoddas vs. Haridas Narandas(1984 GLH (U.J.) 24) (v) Keshavlal Lallubhai Patel & Ors. vs. Patel Bhailal Narandas and Ors. (AIR 1968 Guj. 157) (vi) Ramsingh v. Ramchand (AIR 1924 Privy Council 2) 4.2 Learned
senior Advocates for the petitioners have also drawn attention of this court to sections 7, 32, 39, 40, 42, 43, 44, 46, 47, 53 and 69 of the Indian Partnership Act, 1932 (hereinafter referred to as the Act ). Section 43 of the said Act reads as under:
43.
Dissolution by notice of partnership at will (1) Where the partnership is at will, the firm may be dissolved by any partner giving notice, in writing, to all the other partners, of his intention to dissolve the firm.
(2)The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.
Clauses
(c) , (d) and (g) of section 44 reads as under:
(a) ... ...
(b) ... ...
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business;
(d) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;
(e) ... ...
(f) ... ...
(g) On any other ground which renders it just and equitable that the firm should be dissolved.
4.3 On this point, learned senior Advocates for the petitioners have submitted that on a plain reading of clause 9 of the partnership deed dated 27.7.1999 it is clear that the firm is a partnership at will and, therefore, on notice dated 26.7.2012 being issued, the partnership stands dissolved. The partnership agreement, therefore, comes to an end and so also the arbitration clause. Nothing more exists; the accounts have to be settled. The issue of dissolution is no more left and it is over and even otherwise the partnership comes to an end and as a result, this dispute cannot be referred to arbitration under section 8 of the Arbitration and Conciliation Act, 1996.
4.4 Learned senior Advocates for the petitioners have then submitted that section 44 of the Act is related to independent right of dissolution and that too independent of section 43 of the Act. Section 43 only applies when the partnership is at will, whereas section 44 applies to all types of partnership. They have further submitted that this is a partnership at Will and the dissolution took place under section 43 by mere notice and it is deeming dissolution without adjudication and so there is no need going for arbitration, unlike section 44 which requires adjudication on various disputes by the court. They have then submitted that once the partnership is dissolved, there cannot be a question of continuing the partnership firm for any other purpose. Even if it is a partnership at will, the partners can choose other means to dissolve it also. Nothing prohibits the partners from doing so but that dissolution will be under section 40 of the Act which provides for dissolution by agreement but not under section 43 of the Act. Thus if the partnership is at will, one can go under section 43 and if it is not at will, then suit has to be filed under section 44 of the Act.
4.5 Learned senior Advocates for the petitioners have then submitted that in a genuine case under section 43 of the Act there are three judgments at serial numbers 1 to 3 shown in para 4.1 referred above of our High Court and as held by it there cannot be anything to refer to the arbitration qua actual dissolution as it is over and under such circumstances, the petitioners must be entitled to their legal right/statutory right and so far as this point is concerned, lastly they have submitted that in a partnership at will, because there is no adjudication, once notice dated 26.7.2012 is issued as per law, it got dissolved and there is no question of any referability to arbitration, as section 43 of the Act is a deeming provision. Learned senior Advocates for the petitioners have then submitted that the learned trial Judge has not touched upon nor followed binding decisions of this court referred in para 4.1 hereinabove. They have heavily relied on para 5 of the decision reported in the case of Manibhai Shankerbhai Patel v. Swashray Construction Co. & Ors. (1982 (1) GLR 312) (per A.M. Ahmedi, J (As His Lordship Then was) which reads as under:
5. No provision is made in the partnership deed fixing the duration of the partnership and, therefore, by virtue of section 7 of the Partnership Act, where no such provision is made by contract between the partners, the partnership is a partnership at will . Section 43 of the Partnership Act next provides that where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Once such a notice is given, the firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. It is well-settled that if a suit is instituted for the dissolution of the partnership and for rendition of accounts, the service of the summons along with the copy of the plaint on the other partners is notice of dissolution within the meaning of section 43 of the Partnership Act. It is, therefore, obvious that if in a partnership at will one of the partners does not desire to carry on business in partnership with the other partners and serves notice of dissolution, the firm stands dissolved from the date of dissolution mentioned in the notice and if no such date is mentioned, from the date of communication of the notice to the other partners. That is the effect of section 43 of the Partnership Act. It is in this context of this statutory position emerging from a conjoint reading of section 7 and sec. 43 of the Partnership Act, that one has to determine the scope of clause (16) of the partnership deed. Now, that clause states that if there is any dispute in regard to any matter concerning the firm between the partners, without resorting to the court of law the partners shall have it determined under the Arbitration Act through an arbitrator and the decision of the arbitrator will be binding on all the partners. If under the provisions of the Partnership Act it is open to a partner to dissolve a partnership at will in the manner provided by section 43 of the Partnership Act, that right conferred on a partner cannot be denied to him on the interpretation that clause (16) of the partnership deed is wide enough to cover any and every dispute between the partners. If a partner does not desire to carry on business with his other partners and has a right to dissolve the firm under sec 43 of the Partnership Act, can it be said on an interpretation of clause (16) of the partnership deed that that right is taken away and the partner has no remedy but to continue with the partnership assuming the arbitrator holds against him in the proceedings that may be commenced under the Arbitration Act ? The answer to this poser must necessarily be in the negative. In a partnership at will it is open to a partner even if there is no dispute between the partners whatsoever to dissolve the firm by virtue of section 43 of the Partnership Act. That section does not lay down that there must exist a dispute between the partners for the purpose of dissolving the firm. All that it says is that if the partnership is at will, it is open to any partner to dissolve the firm by giving notice in writing to all the other partners of his intention so to do and on the service of such notice the partnership will stand dissolved from the date mentioned in the notice or from the date of communication, as the case may be. Therefore, in a partnership at will if a partner desires to dissolve the firm by giving notice as required by sec.43 of the Partnership Act, his right cannot be taken away by such an arbitration clause in the partnership deed. If it was the intention of the partners that the partnership should not be dissolved till a certain event happens, than such a specific provision would have been found in the document and the partnership would not have been a partnership at will. It is, therefore, difficult to understand how a partner who desires to dissolve the firm can be forced to resort to arbitration. It, therefore, necessarily follows that clause (16) of the partnership deed has application only during the subsistence of the partnership and it does not have the effect of taking away the right conferred on a partner by sec. 43 of the Partnership Act to have the partnership dissolved by notice if the partnership is a partnership at will. On this interpretation as regards the scope of clause (16) of the partnership deed, it must be held that the learned trial Judge was not right in staying further proceedings in the suit order sec. 34 of the Arbitration Act.
5. Learned Senior Advocate Mr Kamal Trivedi as well as learned Advocate Mr Sanjay Mehta and Learned Advocate Mr U.D. Shukla for the respondents have submitted that the controversy lies in a very narrow compass. When the partnership has been admitted as partnership at will and there is no dispute that the partnership is at will, it stands automatically dissolved when one partner issues notice for dissolution and in such eventuality one partner cannot say that he wants to refer the issue to the arbitrator. In support of their submissions, following six judgments have been pressed into service by the learned senior Advocates for the petitioners:
(i) 1982 (1) GLR 312
(ii) 2001 (4) GLR 3168
(iii) 2006 (3) GLR 2582
(iv) 1984 GLH (U.J.) 24
(v) AIR 1968 Guj. 157
(vi) AIR 1924 Privy Council 2 Learned Senior Advocate for the respondents has then submitted that in the above referred judgments, whether partnership is at will or not was never in dispute and it was in that context this court took the view that the firm having been dissolved, the question cannot be referred to the arbitrator for dissolution. As such these judgments cannot be applied as precedent to the facts of the present case.
5.1 Learned senior Advocates for the respondents has then submitted that this is a case where there is serious disputes about the nature of the partnership which according to the respondents partnership is not at will. In such circumstances, there is no embargo in the eye of law for reference of the matter relating to the dissolution and accounts which are today the subject matter pending in civil suit which must be referred to the arbitrator. According to the respondents, when there is clause relating to arbitration, the trial court has rightly referred all these matters to the arbitrator and there is nothing wrong in it.
5.2 Learned senior Advocate for the respondents has further submitted that the suit partnership is not a partnership at will as sought to be interpreted and stated by the petitioners and, therefore, the petitioners have no right to seek dissolution of partnership firm. According to the respondents, the true and correct interpretation of relevant clauses of partnership deed dated 27.7.1999 are required to be scrutinised thoroughly. Learned senior Advocate for the respondents have submitted that in the suit firm there is a provision for determination of partnership. As per clause 12, it is specifically agreed upon by and between the partners that in case any partner is desirous of retiring, he may retire by giving two months advance notice to the rest of the partners after settling the accounts and that on account of said reason, the said partnership shall not be deemed to have been dissolved but the remaining partners themselves or by inducing third parties as partners, can continue in the said partnership firm. They have further submitted that thus in view of specific agreement between the partners, intention of the parties is that even if some of the partners do not intend to carry on in partnership, the partnership cannot be determined although such partners may withdraw from partnership and terminate legal relationships between themselves, the other partners and partnership will continue between the remaining partners unless all partners mutually agree to determine the relationship. If one reads all the clauses, there is something with reference to the mode of determination of a firm. This mode of determination has impliedly laid down in clauses 12 and that is why one may not call it genuine/pure and simple will as has been tried to make out by the petitioners.
5.2.1 To compare the relevant clauses, learned senior Advocates for the respondents have placed reliance on the following decisions:
(i) AIR 1991 SC 1020
(ii) AIR 2005 Bombay 301
(iii) AIR 1982 Delhi 131
(iv) AIR 2007 MP 153 It is then submitted that clause 12 is required to be read carefully and when the said clause is compared with other clauses which are there in the decisions rendered in various judgments, they are resembling very much similar. It is submitted that in all the judgments and decisions, it is taken that the partnership is not at will, because there is intention that on happening of all these events, the firm will not be deemed to have been dissolved but the rest of the partners will be at liberty to carry out the partnership either by themselves or inducting third party as partner, which requires consideration because there is an arbitration clause, which covers everything. Lastly learned senior Advocates for the respondents have submitted that whether it is a partnership at will or not, the said question also go to arbitration and the arbitrator will have the power to decide whether it is a partnership at will or not. On the interpretation of partnership deed, when two groups have opposite views which is a dispute related to partnership agreement it clearly falls under clause 17 and, therefore, it needs to go to arbitration.
6. So far as the above referred point is concerned, I have considered the above rival submissions made by the learned senior Advocates for the parties in light of the decisions relied upon by them. Section 7 of the Act deals with partnership at will, which reads as under:
7. Partnership at will Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is partnership at will .
6.1 Section 7 says that where no provision is made by the partners for the duration of their partnership, or for the determination of their partnership, then the partnership is at will. Duration or determination of a partnership may be expressed or may in given circumstances be implied. As referred above, to find out resembling similarity related to clause 12 of the Partnership deed dated 27.7.1999, the respondents placed reliance on the decisions shown in para 5.2.1 above.
6.2 Clauses 4 and 5 of the partnership deed mentioned in para 9 in AIR 1991 SC 1020 reads as under:
9.
The material question is whether the partnership deed Ex.B1, is at will. Clause (3) specifies the shares of the partners and clauses (4) and (5) read thus (4) The business of the firm has been started on the 1st of July, 1962 and the partnership will be brought to an end at will (5) The partnership will continue till there are two partners, even in the case of one or several partners withdraw themselves or die, the partnership will continue between the two partners, will remain owners of all the capital, on condition that they should pay back to the withdrawing partners and to the heirs of the deceased partners, only the amount of their rights according to the last inventory.
Referring to the above clause 5, the Hon ble Supreme Court has taken a view that the firm is not a partnership at will . Since there is a provision in the partnership deed that partnership shall continue so long as there are two partners and that is the basis on which the Supreme Court took the view that since there is a provision of duration of partnership, it is not a partnership at will . Clause 12 of the case on hand mentioned in para 2 hereinabove is compared with the above referred clause 5, I find there is major difference. In clause 12 of the instant case there is provision only for retirement and so this decision, in my view, will not be helpful to the respondents.
6.3 Referring to para 17 of the decision reported in AIR 1991 SC 1020, it appears that while deciding the said case, the Hon ble Supreme Court has referred and relied upon the decision reported in AIR 1961 SC 1225. In the said case i.e. AIR 1961 SC 1225, the partnership was only for the purpose of carrying on business of managing agency of two mills. There was no other purpose of partnership. The terms of agreement shown in it clearly establishes that the intention could not be to create partnership at will. The partners contemplated the management and would be carrying on for four years period and that too carry on business of management in rotation. Considering this provision as well as nature of business of partnership, it could not contemplate that the partnership could be brought to an end by notice by either of the parties, but on the contrary it appears that if the managing agency is terminated then, the partnership at will come to an end because termination of the partnership can be seen impliedly from the said fact and thus there was provision of determination of partnership. This case also will not come to any help to the respondents.
6.4 So far as the case reported in AIR 2005 Bombay 301 is concerned it was argued by learned counsel Mr Godbole for the respondent of the said case that clause 12 of the partnership deed has provided for the mode and manner of making accounts and the respondents therein had no option to go as per that clause. Then Mr Godbole placed reliance on the reported decision in AIR 1961 SC 1225 and in para 10 the court concerned has taken the view that since clauses 11 and 12 of the partnership deed are explicitly clear that the partnership was not at will. It is further observed by the court that, in law, so far as this revision or appeal is concerned which is against the interim order, it has to be prima facie held that the partnership was not at Will and that there was no dissolution. The fact related to the second observation is very important, which in my view, is missing so far as this case on hand is concerned. It was the case of the plaintiff in the above referred case that the partnership stood dissolved upon service of his notice and then in his application for appointment of court receiver, the plaintiff therein has contended that the partnership business was required to be continued, otherwise he was going to suffer loss and therefore, for continuation of business appointment of receiver was necessary. The trial court found that these two stands taken by the plaintiff were contradictory to each other. If the partnership is at will and the plaintiff has dissolved partnership under section 43 of the Act then there was no continuation of business and if the plaintiff wanted continuation of business, then impliedly the plaintiff could not contend that he has dissolved the partnership. The High Court i.e. the court concerned has then observed that the partnership was not at will and there was no dissolution and secondly, since the prayer of the petitioner/plaintiff was for continuation of business it was contradicted by his stand taken about dissolution of firm. The court was, therefore, rightly justified in rejecting the said application. Thus, in my view, so far as the case on hand is concerned, no contradictory prayer is there and so the above referred observations/views of the court will not be applicable to the present case.
6.4.1 Before we discuss the above referred judgment i.e. AIR 2005 Bombay 301, learned senior Advocate for the petitioners has placed reliance on two decisions (1) AIR 1968 Guj. 157 and (2) AIR 1976 Bombay 405 and submitted that while deciding AIR 2005 Bombay 301 the court concerned has not noticed the judgment of the learned Single Judge of the Bombay High Court i.e. AIR 1976 Bombay 405 nor relied on (1991) 1 SCC 1020 and so it is per incuriam and therefore, it is not binding to this court. So first of all I will go through the above two decisions referred by the learned senior Advocates for the petitioners and then I will sum up the above referred decisions - AIR 2005 Bombay 301 on which the respondents have placed reliance.
6.4.2 AIR 1968 Guj. 157 - This judgment is of much importance because it is decided by the Division Bench of this High Court and in my view, it is binding to this court vis-a-vis any other High Court except the Hon ble Supreme Court. I have carefully gone through the same. The relevant clauses 6 and 7 respectively of partnership at will and retirement of partners are narrated in para 1. After discussing all the important aspects at length, the Division Bench of this Court has come to its conclusion in para 3 as under:
The conclusion which we must, therefore, inevitably reach is that the retirement of partner from a firm does not dissolve, the firm, that is determine the partnership inter-se between all the partners but merely severs the partnership between the retiring partner and the continuing partners leaving the partnership amongst the continuing partners unaffected and the firm continues with the changed constitution comprising the continuing partners.
So far as clause 7 is concerned, it further finds in para 5 that it is clear from the foregoing discussions that clause 7 of the partnership deed which contains provision for retirement of a partner which is not constituted an expressed provision made by contract between the partners for determination of their partnership within the meaning of section 7 and, therefore, it is not operated to exclude the partnership from the category of partnership at will. Dissolution of the partnership between all the partners is what is contemplated in the definition of partnership at will and retirement of a partner has no bearing on it. Learned Advocates for the petitioners have then submitted that so far as the partnership at will is concerned, this judgment of Division Bench is binding authority which binds this court and I am in agreement with the same.
6.4.3 Head note A of the decision reported in AIR 1976 Bombay 405 reads as under:
(A) Partnership Act (9 of 1932) section 7 partnership at will provision in deed as to retirement of partner is not provision for determination of their partnership within meaning of section 7.
Section 7 makes it clear that two conditions must be satisfied before it can be said that a particular partnership is a partnership at will or to put it differently the deed of partnership must not contain any provisions whether express or implied as to (a) the duration of their partnership or (b) for the determination of their partnership . If these two provisions are absent or cannot be implied then the partnership will be at the will. Whether they are called conditions or exceptions the fact remains that there should be no provision in the contract for determination of their partnership. What section 7 refers to is not a provision far the duration of the partnership but a provision for the duration of their partnership. This means that the deed of partnership must contain a provision for the duration of the partnership consisting of all the partners concerned that is to say a partnership in which each of the existing partners is partner. Similarly, the determination is to be of their partnership and not a partnership from which one of the partners has been excluded. The retirement of a partner merely severs the partnership between the retiring partner and the continuing partners leaving the partnership amongst the continuing partners unaffected and the firm continues with the changed constitution comprising the continuing partners. It follows that any provision in a partnership deed as to the retirement of a partner whether conditional or otherwise, whether at a moment s notice or of a specified period and whether on taking accounts or without taking accounts, cannot be considered to be a provision for determination of their partnership within the meaning of section 7. AIR 1968 Guj. 157, Followed: AIR 1961 SC 1225, Relied on .
While deciding the above referred case, the concerned learned Single Judge of Bombay High Court has referred and relied upon the above referred citation i.e. AIR 1968 Guj. 157 delivered by this court and thus the Bombay High Court while deciding the above referred case, has followed the judgment rendered by Division Bench of Gujarat High Court. While deciding the case of AIR 2005 Bombay 301, the judgment of learned Single Judge of Bombay High Court in AIR 1976 Bombay 405 is completely ignored and it has also not noticed the decision reported in AIR 1991 SC 1020. It is the submissions of the learned senior Advocates for the petitioners that if the binding decision of the High Court is not noticed by the court, then it is per incuriam. The learned senior Advocate for the respondents has relied upon clauses 11 and 12 of the decision reported in AIR 2005 Bombay 301 and as per the same, if all the partners decided to close the partnership business then the business has to be sold on the basis of goodwill and each of the partners is to be given according to his share. This clause 12 was not there before the decision of AIR 1976 Bombay 405 and so AIR 2005 Bombay 301 is not per incuriam because the clauses are different. There appears no substance in the above submissions made by the learned senior advocate for the respondents. As per the submissions made by the learned senior Advocates for the petitioners, if binding decision of the High Court is not noticed by the court, then it is per incuriam. I find substance in the submissions made by the learned senior Advocates for the petitioners and on this count also the judgment reported in AIR 2005 301 will not be helpful to the case of the respondents.
6.5 Referring to para 24 of the citations reported in 1982 Delhi 131, it appears that AIR 1968 Guj. 157 was referred at length and the learned Single Judge of Delhi High Court has not disapproved the ratio laid down and the findings arrived at by the Division Bench of this Court referred above. So this citation will, in my view, not be of any help to the case of the respondents.
6.6 In the reported decision in AIR 2007 M.P. 153, it appears that in the partnership deed, the parties have contracted for dissolution by mutual agreement and option was also available to the partner to seek retirement if he does not want to continue as partner. This decision, in my view, will also not be helpful to the case of the respondents.
6.7 From the above discussion, it is clear that none of the citations on which the respondents have placed reliance is helpful to the respondents. Thus, in my view, there appears no substance and force in the submissions made by the learned senior Advocate for the respondents that in view of the specific agreement dated 27.7.1999 between the partners, the intention of the parties is that even if some of the parties do not intend to carry on in partnership, the partnership cannot be determined and although such partners may withdraw from partnership and terminate the legal relationship between themselves and other partners and partnership will continue between the remaining partners unless all the partners mutually agree to determine the relationship. As referred hereinabove, so far as clause 12 is concerned, and comparing the same with other clauses of various decisions, there appears no resemblance or similarity and I am of the view that the conclusion arrived at by the Division Bench of this court in AIR 1968 Guj. 157 is squarely applicable to the case on hand.
As laid down in the said decision, the matter of retirement of a partner and dissolution of partnership are altogether different things covered by different clauses of partnership deed and provisions of Partnership Act.
6.7.1. In para 12 of the impugned order dated 30.1.2013 passed below Exhs. 18 and 21, the trial court has also observed that it is not in dispute that the partnership deed mark 4/1 is unregistered firm and on plan (sic) reading of clause 9 of the partnership deed, it appears that the suit partnership is a partnership at will . In reply to the notice dated 24.8.2012 by the respondents, the respondents have not specifically denied that the partnership is not a partnership at will and only at the stage of notice of Motion in para 16 this issue is made out that the suit partnership is not a partnership at will as sought to be interpreted and stated by the plaintiffs/petitioners. Learned senior Advocates for the petitioners have submitted that by mere single line denial that the partnership is not at will and there is a serious dispute about the nature of partnership and so there is no embargo in the eye of law for reference of the dispute to the arbitration will not take away the legal and statutory right of the petitioners which the petitioners have derived under clause 9 of the partnership deed. As such in view of the provisions of the Act, more particularly section 43 of the Act, the court concerned has no discretion to grant a decree of dissolution and/or refuse to grant a decree of dissolution, inasmuch as, the conditions precedent for the purpose of applicability of section 43 is satisfied then by operation of law itself, the firm stands dissolved and accordingly it is for the Hon ble Court to declare dissolution of the firm. From the above discussion, I am of the view that the partnership deed dated 27.7.1999 is a partnership at will as per clause 9 of the partnership deed. Now the important question to be decided is whether in the partnership at will, issue of dissolution can be referred to arbitration as submitted by the learned senior Advocate for the respondents or it cannot be referred to arbitration as has been argued by the learned Senior Advocates for the petitioners under section 69 of the Act more particularly when the partnership firm is not a registered one.
7. Learned senior Advocates for the petitioners have then submitted that the trial court has mainly placed reliance on a decision relied on by the respondents reported in Prabhu Shankar Jaiswal v. Sheo Narain Jaiswal [(1996) 11 SCC 225] which was also considered and followed the decision in the case of Prem Lata and Ors v. Ishar Dass Chaman Lal [(1995) 2 SCC 145]. They have further submitted that the judgment which was rendered in the case of Hemendra Babulal Shah HUF v. Babulal Shivlal Shah reported in 2006 (3) GLR 2582 by Hon ble Justice K.M. Mehta had advantage of the judgments rendered by Hon ble Justice C.K. Thakker and Hon ble Mr Justice A.M. Ahmedi (As Their Lordships then were) respectively reported in 2001 (4) GLR 3168 and 1982 (1) GLR 312 and also referred the decision of the Supreme Court in the case of Prem Lata (supra) and also the fact that Hon ble Mr Justice C.K. Thakker had already dealt with the decision of Supreme Court judgment in the case of Prabhu Shankar Jaiswal (supra) and thus the said three judgments of this court are binding to this court as far as partnership at will is concerned and such a dispute cannot be referred to arbitration. On this point, learned senior Advocate for the respondents has submitted that in the above referred judgments of this court, partnership at will or not was never in dispute. It was in that context, this court took the view that the firm having been dissolved, the question cannot be referred to the arbitration for dissolution and so the said judgment of our High Court cannot be applied as precedent to the facts of the present case. Learned senior Advocate for the respondents has then submitted that if this being the situation, the respondents have given application under section 8 of the Arbitration and Conciliation Act, 1996 and placed reliance on the case law referred below:
(i) P. Anand Gajapathi Raju and Ors v. P.V.G. Raju (dead) and ors. ([2000] 4 SCC 539)
(ii) V.H. Patel and Company v. Hirubhai Himabhai Patel [(2000) 4 SCC 368]
(iii) Kalpana Kothari (smt) v. Sudha Yadav (smt) and ors [(2002) 1 SCC 203] 7.1 Learned senior Advocates for the petitioners have then submitted that assuming that the partnership agreement does not come to an end because of dissolution and the arbitration clause 17 survives, and in such an event also, the language of the arbitration clause is such which would not cover the dissolution or accounts. The scope of arbitration clause is limited to the dispute during the pendency of the partnership and not on dissolution. In support of their submission, they have relied upon a decision reported in 1984 GLH (U.J.) 24 (supra). It is held in that case that any dispute in respect of any interpretation of the deed or about the conduct of partner or partners shall be referred to arbitrators under the provisions of Arbitration Act and such an award was binding on all the partners of the firm. Obviously dissolution of the firm is not covered by the said clause.
7.2 Learned senior Advocates for the petitioners have also submitted that further assuming that arbitration clause survives and also assuming that it even covers settlement of accounts post dissolution, what could be referred to arbitration is only the settlement of accounts. They have vehemently submitted that the dispute whether this particular partnership is a partnership at will or otherwise, is not referable to the arbitration because the firm is not a registered firm. In support of their submissions, they have further relied on two decisions (1) M/s.
Krishna Motor Service v. H.B. Vittala Kamath (AIR 1996 SC 2209) para 7 and (2) Jagdishchandra Gupta v. Kajariya Traders (India) Ltd. (AIR 1964 SC 1882) which is referred and relied upon in case of Krishna Motor (supra).
Drawing attention of this court to para 7 of the judgment of M/s. Krishna Motor (supra), learned Senior Advocate for the respondents have submitted that para 7 of the said judgment is completely passing observations of the Hon ble Supreme Court and as such the same is obiter dictum which would not apply to the present case.
7.3 The relevant provisions of section 69 of the Indian Partnership Act, 1932 are as under:
69.
Effect of Non-Registration (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
(2)No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(3)The provisions of sub-sections (1) an (2) shall apply also to a claim of set off or other proceeding to enforce a right arising from a contract, but shall not affect -
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or
(b) the powers of an official assignee, receiver or court under the Presidency-towns Insolvency Act, 1909 (3 of 1909), or the Provincial Insolvency Act, 1920 (5 of 1920), to release the property of an insolvent partner,
4. ... ...
It is not in dispute that the partnership firm in the case on hand is an unregistered firm. As this is an unregistered firm what is the effect of non-registration of the firm is borne out in section 69 referred above. So far as the sub-sections (1) and (2) and main part of subsection (3) is concerned they have set out certain prohibitions and certain things in respect of unregistered partnership firm which cannot be done. However, to these prohibitions, we find exceptions which are set out in clause (a) of sub-section (3), and clause (b) of sub-section (3) and sub-section (4). For the purpose of the dispute involved in this case sub section (3) of section 69 is important to be looked into. Sub section (3) provides that sub-sections (1) and (2) would also apply to a claim of set-off or other proceedings to enforce a right, arising from a contract but shall not affect three things and three things can go to arbitration. The dispute if, it is referred to arbitration, must be falling within these three exceptions (1) dissolution of firm (2) accounts of a dissolved firm and (3) release of properties of the dissolved firm.
7.4 The main submissions on the part of the learned senior advocates for the petitioners is that clause 17 of the partnership deed is falling within the arbitration, but it does not fall within three exceptions and since it was not falling within three exceptions it cannot go to arbitration because the firm is not registered. Referring the reply filed by the respondents to the Notice of Motion Exh. 23, copy of which is in Appeal from Order at page 84 para 16, the learned senior Advocates for the petitioners have submitted that a single line specific plea has been taken by the respondents that the suit partnership firm is not a partnership at will. The petitioners are contending that it is a partnership at will and the respondents are disputing that contention. Thus, when the respondents are contending that this is not a partnership at will, then it is the issue arising from the contract. The moment the respondents raised the contention that the suit partnership firm is not a partnership at will, then that issue is the issue arising out of contract of partnership and not for dissolution of the firm and not for accounts and not for recovery of the properties of the firm and so that issue does not fall under section 69(3) (a) of the Act and as a result that issue cannot be referred to the Arbitration if the firm is not registered.
7.4.1 In this regard, the petitioners have placed reliance on para 21 of a decision reported in Sheth Loonkaran Shethiya v. Ivan E. John (1977) 1 SCC 379 and relevant portion reads as under:
Section 69 is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved is void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of section 69 of the Partnership Act.
Learned senior advocates for the petitioners have then submitted that thus actual consideration of the issue with regard to the grounds for dissolution is protected by section 69 of the Act but whether one has right or not is not protected by section 69.
7.4.2 On this point learned senior Advocate for the petitioners have also relied on para 7 of the decision in the case of M/s Krishna Motor Service (supra) (AIR 1996 SC 2209) which reads as under:
7.
If the right to dissolve the firm itself is in dispute and is subject matter of the suit, necessarily in the suit for dissolution of the partnership firm, if a party to the contract of partnership seeks a reference for arbitration to resolve that dispute, it would be a right from a contract arisen in the proceedings for enforcement of the right to dissolve the firm. In that event, necessarily, the main part of subsection (3) stands attracted and no such reference is valid in law. But in a case where the parties have already agreed for dissolution of the partnership by mutual consent, the partnership stood dissolved. There is no dispute as regards the right arising from the contract of a firm. The dispute is only with regard to working out the rights flown from dissolution for settlement of accounts of the dissolved firm or any right or power to realise the property of the dissolved firm etc. That right would form part of the exception engrafted in sub-section (3) of Section 69. The object intended by the legislature appears to be that in spite of the defect of non-registration and the prohibition created in the main part of non-enforceability of the right arising from a contract, the parties having worked under that contract, to the limited extent of the enforcement of a right to realise the assets, settlement of the accounts of the dissolved firm or any right or power to realise the property of the dissolved firm are exceptions engrafted therein and gives right to the parties to enforce the same, independent of the right arising from the contract. Therefore, the parties are relieved from the prohibition created by operation of section 69. (emphasis supplied)
8. Referring to the impugned order dated 30.1.2013 passed below Exhs. 18 and 21 it appears that the trial court has, as such placed reliance on the decision of Prabhushankar Jaiswal (supra) and formed the opinion that clause 17 of the partnership deed covers the dispute regarding dissolution of the firm and also of the opinion that the plaintiff s suit falls within the meaning of section 69(3)(a) of the Indian Partnership Act and so the arbitration is maintainable. Learned senior Advocate for the respondents has submitted that section 69(3)(a) of the Act came before the Hon ble Supreme Court for interpretation in Prabhushankar Jaiswal (supra). He has then submitted that the decision of Prabhushankar Jaiswal (supra) in 1996 held the field related to unregistered firm and held that the partners can maintain arbitration application for referring the parties to arbitration whether for seeking dissolution through the court or through arbitrator or also for seeking accounts of a dissolved firm. In both situations which are covered explicitly by this decision and lack of registrability is not barred specially for right to sue. He has, then submitted that this is the latest judgment on the point of time from the Supreme Court and, therefore, to say that this judgment will not apply because it is not a partnership at will, this exactly which needs to be carefully considered. In a partnership at will when both the sides accept that this is a partnership at will, then dissolution follows. Gujarat High Court took the view under old Act that in the partnership at will, issue of dissolution cannot be referred to arbitration. He has, then submitted that whether it is a partnership at will, or not the partnership at will, the said question will also go to arbitration and the arbitrator will be having the power to decide whether it is a partnership at will or not. Lastly he has submitted that on the interpretation of partnership deed, two groups having opposite views, which is a dispute relating to partnership agreement and it clearly falls under clause 17 of the partnership deed and, therefore, it needs to go to arbitration and the learned trial Judge has not committed any error in passing the impugned order and the same is not required to be interfered with. It is important to note that while delivering the decision in Prabhushankar Jaiswal (supra), it was referred and followed the reported decision in the case of Prem Lata (smt) (supra).
8.1 Learned Senior Advocates for the petitioners have then submitted that in Prabhushankar Jaiswal (supra) as well as Prem Lata (smt) (supra) the court has decided the important law to appreciate the dispute involved in those cases. They have further submitted that the cases Prabhushankar Jaiswal (supra) as well as Prem Lata (smt) (supra) dealt with two things. First aspect with regard to section 69 of the Partnership Act i.e. with regard to the aspect that if the partnership is unregistered firm and the partner makes application for going for arbitration for dissolution and accounts, he can go ahead and the application is maintainable. The second aspect in this context of section 69, there are observations on the partnership and if you want to go for dissolution, that can be decided by arbitrator and the respondents have relied on it and as per the respondents in the case of partnership at will, in light of the said observation, the arbitration can go into the said issue. Learned senior Advocates for the petitioners, then strenuously submitted that they have never argued that in the case of issue of dissolution the same cannot go to arbitration and further submitted that their argument is limited to the extent that these observations cannot apply to a partnership at will.
8.2 I have considered the rival submissions made by the learned senior Advocates for the parties. It is the fact that the judgment of Prabhushankar Jaiswal (supra) as well as Prem Lata (smt) (supra) are not in the case of a partnersip at will and whether the firm is a partnership at will or not the said issue was not before the Supreme Court when they have delivered the above referred two judgments i.e. Prabhushankar Jaiswal (supra) as well as Prem Lata (smt) (supra). It is also important to note that the decision in M/s. Krishna Motor Service (supra) was not overruled while deciding the case of Prabhu Shankar Jaiswal (supra).
As such while deciding the above referred judgment, the decision relating to M/s. Krishna Motor Service (supra) was neither considered nor it was required to be considered. The judgment of Justice A.M. Ahmadi reported in 1982 (1) GLR 312 is whether the firm is a partnership at will or not. Learned senior Advocates for the petitioners have drawn attention of this court to the decision in Prabhu shankar Jaiswal (supra) and submitted that referring the name of Hon ble Judges Justice A.M. Ahmadi, Chief Justice and Sujata V. Manohar, JJ. have delivered the same. Justice Ahmadi as a Judge of Gujarat High Court, took the view that in the case of partnership at will, in light of reasoning contained in para 5 referred hereinabove in para 4.5 one cannot go to arbitration and after elevating to Supreme Court, Justice Ahmadi as a Chief Justice, is alleged to have taken the view that even in the partnership at will one can go to arbitration is practically not acceptable. When this judgment of Prabhu shankar Jaiswal(supra) states that in the context of section 69, the issue can be referred to arbitration for dissolution under section 69 (3)(a) of the Act is the general statement in the case of partnership firm being unregistered one and one can go for arbitration. They have submitted that one can go for dissolution of the firm under any of the provisions of the Act as provided under section 44 of the Act but while delivering the judgment, Justice Ahmadi in Manibhai Shankerbhai Patel (supra) (1982 (1) GLR 312) was precisely on the issue that if there is a partnership at will, one has statutory right to dissolve the firm and then if one wants to interpret the clause for arbitration that arbitration cannot take away the statutory right. Learned senior Advocates for the petitioners have then submitted that this judgment of Prabhu shankar Jaiswal (supra) is at a general proposition and at the same time consistent view of Gujarat High Court in three cases is that if the firm is a partnership at will, one cannot go to arbitrator. Therefore, in my view, so far as the second part of the two judgments i.e. Prabhu shankar Jaiswal(supra) as well as Prem Lata (smt.) (supra) is concerned the issue with regard to dissolution can be referred to arbitrator but not for the purpose of determining whether partnership is a partnership at will or not because the firm is not registered. Thus, in my view, the two judgments i.e. Prabhu shankar Jaiswal(supra) as well as Prem Lata (smt.) (supra) of the Supreme Court would not be helpful to the respondents as has been argued by them.
9. Learned senior Advocates for the petitioners have also submitted that there are distinctions in the case of unregistered firm and application of section 69 of the Act. When there is dispute whether this partnership firm is a partnership at will or otherwise, the same is not referable to the arbitration because the firm is unregistered. The decision in Prem Lata (smt.) (supra) was delivered by the Hon ble Supreme Court by Justice K. Ramasway and Sujata V. Manohar, JJ. of the Supreme Court. In M/s. Krishna Motor Service (supra), Justice K. Ramaswamy was one of the Judges along with Justice G.B. Pattanaik. In the case of Prem Lata (smt.) (supra) the Supreme Court took the view that under section 69 of the Act even in the case (first part) if you file an application, though you are an unregistered firm for dissolution and refer the matter before arbitration then it is held that you are protected under section 69 of the Act but the same Judge, while delivering the judgment in M/s. Krishna Motor Service (supra), in para 7 held that when right to dissolve itself is in dispute, the adjudication of determination of the said right is not protected by section 69 (3) of the Act.
9.1 On the above point, learned senior Advocate for the respondents mainly argued that judgment in M/s.
Krishna Motor Service (supra) should be ignored as the observation made in para 7 is the passing observation and the said observation is obiter dictum and not the ratio laid down by the Supreme Court and there is subsequent judgment in Prabhu Shankar Jaiswal s case and so M/s.
Krishna Motor Service (supra) is not required to be considered. It is important to note at this juncture that M/s. Krishna Motor Service (supra) is not overruled by judgment in Prabhu Shankar Jaiswal. Moreover, both the Supreme Court judgments viz. Prabhu Shankar Jaiswal (supra) as well as Prem Lata (smt.) supra, are not dealing with partnership at will.
9.2 I have carefully considered the above referred submissions made by the learned Advocates for the parties. Referring to para 7 of the decision reported in M/s.
Krishna Motor Service (supra), it is laid down therein that whether you have any right or not, that part would not fall under exceptions engrafted in clause (a) of sub-section (3) of section 69 of the Act, but if one has the right and if one wants to enforce that right, the said issue can be brought to the notice even if the partnership was not registered. If the respondents raise the issue that the petitioners have no right to seek dissolution then that issue is different from section 69(3)(a) of the Act. When the respondents contended that this firm is not partnership at will, then it goes to the very right to claim dissolution. If somebody has to decide whether the petitioners have right to dissolve the firm, that issue does not fall under section 69(3)(a) of the Act. Thus, it is clear that if the said issue does not fall under section 69(3)(a) of the Act, that issue cannot be referred to the arbitration if the firm is not registered. If we take it differently, the moment the respondent raise the plea that this firm is not partnership at will, the issue to be decided between the parties is whether the firm dated 27.7.1999 is partnership at will, or not and accordingly this matter falls in first part of sub section (3) of section 69 of the Act and not in three exceptions under section 69(3)(a) of the Act because this is the dispute arisen out of the contract. Whether this firm is a partnership at will or not is a matter of interpretation of the contract itself. Once it is a matter of interpretation of contract, it can be referred to arbitration for accounts and release of the properties of the firm and not for dissolution of the partnership because the firm is not registered. Learned senior Advocates for the petitioners have also submitted that let the respondents make a statement that they are not disputing dissolution, then the petitioners are ready to go for arbitration for accounts and for release of properties of the firm. In short, considering the decision in the case of M/s.
Krishna Motor Service (supra) it appears that if the respondents are raising the plea that this firm is not partnership at will, then that issue cannot go to arbitration because it is unregistered firm. It is important to note that this finding of the Supreme Court is not watered down in any judgment and in my view, it is not the passing observation and the same is binding to this court and if at all it is obiter dictum, then also the same is of the Supreme Court.
10. Learned senior Advocate for the respondents has then relied on a case in Kalpana Kothari (smt) vs. Sudha Yadav (smt) and Ors [(2002) 1 SCC 203]. In this judgment, the differences between the old Act, 1940 and the new Act 1996 of Arbitration Act is highlighted. Section 34 of 1940 Act contemplates for stay of the proceedings and new Act 1996 which is not contemplated stay of proceedings. The moment the application under section 8 is filed, the suit goes to arbitration. In fact, the suit was filed for dissolution of partnership under section 44 of the Act which would not be the case under section 43 of the Act in case of partnership at will or unregistered firm and thus in my view, this decision will not render any help to the respondents.
10.1 Learned senior Advocate for the respondents has then relied on V.H. Patel & Company & Ors vs. Hirubhai Himabhai Patel & Ors [(2000) 4 SCC 368]. This judgment is not reference under section 8 of the Arbitration and Conciliation Act, 1996. Only on consent terms the arbitrator was appointed and the appeal was disposed of on consent terms. Moreover, the arbitration clause in this case is in para 9. It is reproduction of clause 11 and it speaks about disputes between the parties. Arbitration clause 17 of the case on hand i.e. the instant case narrated in para 2 hereinabove which speaks about partner and not parties. The distinction is that if it is arbitration in such a manner, if the partnership is dissolved, then agreement will be followed and then it is dispute between various parties. The partnership is not dissolved because it is the dispute between the partners. Thus, this judgment has no relevance with the present case.
10.2 Learned senior Advocate for the respondents has also relied on P. Anand Gajapathi Raju & Ors v. P.V.G.Raju (dead) and others [(2000) 4 SCC 539]. In this case, during the pendency of the appeal, all the parties have entered into arbitration agreement and they have agreed to refer the dispute in this appeal to Justice S. Ranganath Misra, a Retired Judge of the Supreme Court as the sole arbitrator and the question which had arisen for consideration was whether the Supreme Court in appeal, can refer the parties to arbitration under the new Act. Under the circumstances, the Supreme Court was satisfied and observed that arbitration agreement in form of an application covers all the disputes between the parties even more than that and it is observed that language of section 8 is peremptory and it is obligatory for the court to refer the parties to arbitration in terms of their agreement. Thus, as discussed hereinabove, the said fact of this judgment has no relevance with the present case.
10.3 Learned Advocate for the respondents has also placed reliance on unreported judgment dated 18.12.2012 delivered by this court in Special Civil Application No. 5158 of 2011 and submitted that in the above referred unreported judgment, it was a partnership suit and the decision of this court in the case of Mohanlal Sajandas & Anr. v. Hareshkumar Narandas & Ors. 2001 (4) GLR 3168 delivered by Justice C.K. Thakker was cited before the said court and yet the matter was referred to arbitration.
I have carefully perused the same. The dispute is for recovery of certain amount and the issue is with regard to settlement of accounts and the issue with regard to dissolution of the firm was not at all there because as referred in para 10, it is an admitted fact that the partnership has already come to an end and dissolved and the issue was related to refer the same related to accounts to be referred to arbitration and not for dissolution. Under the circumstances, in my view, this decision has no relevance with the dispute involved in the present case so it will not render any help to the respondents.
11. Considering the above referred discussions made by this court and considering the fact of the case of Prabhu Shankar Jaiswal (supra) and the ultimate ratio derived by the Hon ble Supreme Court, I am of the view that the ratio of the said case is not applicable to the present subject matter as discussed hereinabove and I am of the view that the trial court has miserably failed in coming to the conclusion that the subject matter in dispute is covered by the judgment reported in Prabhu Shankar Jaiswal (supra). As per the case of the petitioners, the partnership is partnership at will, and as per clause 9 of the partnership deed and, in light of the provisions of section 43 of the Indian Partnership Act, 1932, the firm shall stand dissolved on issuance of notice. As discussed hereinabove, the respondents have disputed the dissolution. Thus, I am of the view that when the dissolution itself is in dispute, the matter cannot be referred to the arbitrator as the firm is unregistered and in view of the same, these Special Civil Applications are allowed and the impugned order dated 30.1.2013 passed below Exhs. 18 and 21 in Civil Suit No.2813/2012 and Civil Suit No. 2814 of 2012 and the order dated 30.1.2013 passed below Exhs. 17 and 20 in Civil Suit No. 2815 of 2012 are being illegal, unjust and against the settled principles of law and are liable to be set aside and are accordingly set aside.
12. So far as the above referred Appeal from Orders are concerned, learned senior Advocates for the petitioners have submitted that while passing order under section 8 of the Arbitration and Conciliation Act, 1996 below Exh. 18 and Exh. 21 dated 30.1.2013, the trial court has not decided the Notice of Motion Exh. 6 and Injunction Application No. 7 on merits and has committed error because in the order it was observed that the partnership is at will. When the trial court has referred the suit to arbitration, the court was duty bound to convert the suit as section 9 application under the Arbitration and Conciliation Act, 1996 and decide the section 9 application for the purpose of grant of interim relief. Learned Advocate for the respondents has argued that unless the petitioners agreed to the suit being referred to arbitration, the question of converting the suit under section 9 would not arise. So far as the Notice of Motion Exh.6 and injunction application Exh. 7 is concerned, the trial court has come to the conclusion that as the matter is referred to arbitrator, the said Hon ble Court has no jurisdiction to decide the Notice of Motion and hence without going into the merits of the said Notice of Motion, the same was rejected by order dated 30.1.2013. As the Special Civil Applications challenging the orders passed below Exhs. 18 and 21 in Civil Suit Nos. 2813 and 2814 of 2012 and the order dated 30.1.2013 passed below Exhs. 17 and 20 in Civil Suit No. 2815 of 2012 have been set aside, the Appeal from Orders in turn deserves to be allowed and they are required to be remanded for fresh hearing. Hence without entering into the merits of these Appeal from Orders, the same are allowed and the order dated 30.1.2013 passed below Notice of Motion Exh. 6 and injunction application Exh.7 are set aside and the trial court is ordered to proceed further with fresh hearing of Exh. 6 and Exh. 7 and rest of the applications if any and decide the same in accordance with law and on its own merits and without being influenced by the order passed in the above referred Special Civil Applications. The interim protection granted by the trial court which was as such extended vide order dated 21.2.2013 passed in Appeal from Order No. 63/2013 is hereby extended on the same terms and conditions till the Notice of Motion Exhs. 6 and 7 is heard afresh as directed above and dispose of the same on merits. The trial court is further directed to hear Exhs. 6 and 7 afresh and dispose of the same not later than 31.7.2013.
13. I have considered the affidavit-in-reply filed by the respondents in Civil Application No. 3878 of 2013. In view of the order passed in the main Appeal from Orders, the said Civil Application No. 3878 of 2013 stands disposed of accordingly and Civil Applications No. 1993 to 1995 of 2013 for stay do not survive and the same are also accordingly disposed of.
[G. B. SHAH, J.] msp Page 54 of 54